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THE  MEANS  FOR  CO-OPERATIVE 

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D.  A.  TOMPKINS  OF  CHARLOTTE,  N.  C. 


REPUBLISHED   FROM 

MANUFACTURERS'    RECORD,    BALTIMORE,    MD. 

19  04 


STEPHEN  Bo  WEEKS 

CLASS  0FI886;PH.D.  THE  JOHNS  HOPKINS  UNIVERSITY 


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BUILDING  AND  LOAN  ASSOCIATIONS 


The    Means    for    Co-Operative    Savings 
fov  Southern  Working    People 


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D.   A.  TOMPKINS  OF  CHARLOTTE,   N.   C. 


Republished  from 

MANUFACTURERS'     RECORD,     BALTIMORE,     ME). 

1904 


PREFACE 


That  country  is  always  the  most  prosperous  whose  workpeople  have  the  most  and 
best  home  life.  The  most  and  best  home  life  conduces  to  the  highest  wages,  the  best 
education  and  training  and  the  greatest  prosperity  of  a  nation  and  of  all  its  people. 

I  have  worked  as  a  machinist,  as  a  designer  of  machinery  in  the  drafting-room, 
as  master  machinist,  and  in  conducting  a  business  of  constructing  industrial  works 
on  my  own  account.  In  each  of  these  occupations  I  have  found  the  "home"  or  "local" 
building  and  loan  association  of  invaluable  service,  and  its  exacting  but  fair  require- 
ments have  been  of  inestimable  advantage  to  me. 

When  I  was  a  machinist,  the  building  and  loan  association  made  for  me  an 
opportunity  for  regularly  saving  a  portion  of  my  pay.  While  working  for  wages, 
and  later,  when  receiving  a  salary,  I  accumulated  some  little  capital,  and  was  always 
getting  an  enforced  training  in  economy  and  promptness.  The  condition  imposed 
by  the  association,  of  regular  and  prompt  payment  of  dues  or  submission  to  a  fine, 
made  just  enough  coercion  to  enforce  upon  me  the  habit  of  regular  savings  and 
prompt  payments.  Since  I  entered  upon  business  for  my  own  account  the  shares 
which  I  have  carried  in  the  building  and  loan  associations  have  ever  given  me  a  feel- 
ing of  security,  in  the  consciousness  of  holding  a  reserve  fund.  Once  or  twice  I  have 
had  occasion  to  make  use  of  this  resource  at  times  when  I  might  otherwise  have  been 
more  or  less  embarrassed. 

Being  much  impressed  with  the  advantages  of  the  building  and  loan  system  for 
the  people  of  any  community,  I  have  in  this  monograph  endeavored  to  exhibit  these 
advantages  as  I  have  seen  them,  for  the  benefit  of  other  working  people. 

D.  A.  Tompkins. 
Charlotte,  N.  C. 


BUILDING  AM)   LOAN  ASSOCIATIONS 


CHAPTER    I. 

Co-operative  Saving. 

For  working  people,  the  difference  between  prosperity  and  poverty  may  depend 
upon  slight  differences  in  the  systems  of  education,  labor  or  savings  which  have  been 
afforded  them. 

The  object  of  this  writing  is  to  discuss  the  best  system  of  savings  institutions 
which  has  been  devised,  and  to  show  how  to  use  it. 

The  most  successful  and  most  advantageous  system  for  working  people  is  that  of 
co-operative  institutions,  whereby  working  people  may  help  themselves  and  make 
their  own  way  to  prosperity. 

The  most  important  conditions  which  I  conceive  to  be  necessary  for  the  main- 
tenance of  a  successful  co-operative  savings  institution  are  these  : 

(1).  The  development  of  a  high  respect  for  Christian  principles.  This  work  is 
naturally,  to  a  large  extent,  in  the  hands  of  the  ministers  of  the  different  Christian 
denominations. 

(2).  The  development  of  intelligence  and  skill  by  education  and  training.  The 
development  of  intelligence  rests  upon  the  system  of  education  provided  by  the  State. 
The  execution  of  the  system  is  in  the  hands  of  the  teachers.  The  development  of 
skill  rests  upon  the  system  of  industry  or  labor  fostered  by  the  State.  The  execution 
of  the  system  rests,  in  industrial  pursuits,  with  the  employer  and  the  workman ;  in 
agricultural  pursuits,  with  the  farmer. 

These  preliminary  conditions  are  fairly  well  fulfilled  in  almost  all  communities 
in  the  United  States.  Wherever  they  are  well  fulfilled  human  labor,  when  aggre- 
gated, is  a  most  excellent  basis  of  credit. 

At  some  time  in  the  past  somebody  discovered  that  human  life,  when  taken  in  the 
aggregate,  is  a  good  collateral — an  excellent  basis  of  credit.  Upon  this  theory,  with 
proper  regard  for  surroundings  of  industry  and  economy,  life  insurance  companies 
have  been  formed,  and  from  very  small  beginnings  have  accumulated  vast  wealth. 
Nothing  is  more  uncertain  than  the  life  of  one  individual.  Nothing  in  human  affairs 
is  more  certain  than  the  average  life  of  5000  men  having  normal  surroundings. 

So  also  an  agreement  with  one  workingman  is  an  uncertain  basis  of  credit.  One 
workingman  might  be  dishonest,  might  lose  his  job,  might  get  sick,  or  might  die. 
Five  hundred  or  a  thousand  workingmen  together,  however,  have  a  certain  average 
condition  of  continued  work  and  pay.  If  one  drops  out,  another  can  take  his  place. 
This  makes  the  very  best  basis  of  credit,  superior  to  all  other  forms  of  security. 

All  accumulated  property,  except  land,  is  the  result  of  past  labor.  Even  land 
would  have  no  value  except  for  labor.  Buildings  depreciate.  They  become  old  and 
obsolete.    Corporate  securities  are  uncertain  and  hazardous.    Even  land  itself  depre- 


ciates  under  changed  conditions.  But  the  labor  of  <a  country  is  always  in  the  most 
modern  form  and  of  the  fullest  value.  Current  labor — the  labor  of  today — labor  in 
(lie  aggregate — when  its  uncertainties  are  eliminated,  ranks,  as  a  basis  of  credit, 
above  the  very  best  of  other  forms  of  collateral. 

A  building  and  loan  association  is  an  institution  for  aggregating  and  averaging 
the  net  results  of  labor  and  establishing  it  as  a  basis  of  credit.  To  illustrate  its  oper- 
ations, assume  that  500  people  form  an  association.  They  may  be  machinists,  brick- 
layers, merchants,  clerks,  telegraph  operators,  etc.,  all  working  people,  and  all  having 
fair  prospects  of  regular  employment  for  wages  or  salaries.  If  each  member  pays 
in  $1  a  month,  these  500  people  will  save  an  aggregate  of  $500  a  month.  In  two 
months  the  association  will  have  $1000.  This  may  be  used  to  build  a  house  for  one 
of  the  members.  The  house  is  deeded  to  the  member  for  whom  it  is  built.  The  asso- 
ciation retains  a  mortgage  on  it  to  insure  payment  of  dues  and  interest  until  each 
other  member,  in  turn,  gets  a  house.  This  usually  requires  regular  payment  for 
about  six  and  one-half  years. 

The  member  moves  into  his  new  house.  The  rent  formerly  paid  is  now  saved, 
to  be  applied  as  part  of  the  dues  and  interest  payable  to  the  building  and  loan  asso- 
ciation. In  some  cases,  when  rent  is  high,  the  rent  alone  will  pay  dues  and  interest. 
In  such  cases  rent  money  literally  buys  a  home.  In  all  cases  the  rent  money  pays 
a  large  portion  of  the  instalments.  At  the  worst,  a  very  small  additional  outlay  is 
required  for  a  home  of  comparatively  high  value. 

Where  houses  are  rented,  in  half  the  cases  the  rent  money  will  pay  half  the  cost 
of  the  house  in  about  six  and  one-half  years.  In  a  quarter  of  the  cases  the  rent 
money  will  pay  three-quarters  of  the  cost.  In  a  quarter  of  the  cases  the  rent  money 
will  pay  all  the  cost.  These  differences  depend  on  the  cost  of  building,  the  rates  of 
rent  and  the  discretion  and  taste  of  the  member  who  builds. 


CHAPTER   II. 

Building  and  Loan  Associations  in  the  United  States  and  England. 

The  membership  of  these  associations  has  been  mainly  drawn  from  industrial 
wage-workers.  It  is,  however,  by  no  means  confined  to  this  class.  The  membership 
of  most  associations  includes  also  merchants,  professional  men,  teachers,  preachers, 
and  in  some  cases  also  capitalists  and  farmers.  Building  and  loan  associations  have 
had  their  greatest  development  in  Philadelphia  and  adjoining  towns  in  Pennsyl- 
vania. They  have  been  notably  successful,  however,  in  and  near  Baltimore,  Md.,  and 
in  Charlotte,  N.  C.  They  have  also  succeeded  in  the  principal  cities  of  the  States 
just  north  of  the  Ohio  river,  and  in  many  other  parts  of  the  United  States.  The 
plan  of  organization  is  briefly  as  follows  : 

A  charter  is  obtained  and  by-laws  are  prepared. 

A  subscription  list  or  subscription  blanks  are  provided  ;  sometimes  both. 

An  admission  fee  of  25  to  50  cents  per  share  is  usually  charged  to  pay  for 
charter,  cost  of  books,  stationery  and  expenses  connected  with  organization. 

The  payments  are  usually  fixed  at  25  cents  a  week  or  $1  a  month  per  share.  It 
is  best  to  make  the  payments  by  the  week,  with  provision  for  those  who  prefer  to 
pa j7  by  the  month. 

In  most  cases  from  500  to  1000  shares  are  subscribed  before  business  is  begun. 
Associations  are  sometimes  organized  and  put  into  operation  with  no  more  than  100 
shares  subscribed.  This  would  give  an  income  of  about  .$100  a  month.  To  accumu- 
late $000  to  lend  to  a  member  to  build  a  modest  house  would  require  six  months.  It 
would  be  necessary  in  such  a  case  for  officers  to  serve  practically  without  pay.  Yet 
a  small  beginning  like  this  has  in  many  cases  been  made,  and  the  organization,  under 
careful  management,  has  grown  into  a  large  and  important  institution.  Indeed,  it 
would  seem  that  in  most  cases  of  starting  a  new  business  small  beginnings  are  advan- 
tageous. 

In  all  cases  the  money  is  loaned  to  members  as  fast  as  it  is  accumulated  in  such 
sums  as  they  may  desire,  and  on  the  approval  of  the  board  of  directors,  or  of  a  credit 
committee  of  the  board.  A  first  mortgage  is  taken  on  the  property  on  which  the  bor- 
rowed money  is  spent.  Loans  to  the  extent  of  about  two-thirds  to  three-fourths  the 
value  of  the  property  are  usually  considered  safe.  If  the  borrower  owns  a  lot  he 
can  generally  get  enough  money  to  build  the  house.  If  a  member  has  no  lot  he  may 
find  somebody  willing  to  sell  one  on  long  time  and  take  a  second  mortgage,  provided 
the  first  mortgage  is  given  to  the  building  and  loan  association  to  secure  a  loan  for 
building  a  house  'on  the  lot. 

Land  companies  and  individuals  trading  in  land  are  often  willing  to  sell  a  lot 
on  these  terms.  When  the  payments  to  the  building  and  loan  association  are  com- 
pleted, say  in  six  and  one-half  years,  its  debt  and  mortgage  are  cancelled,  and  then 
the  second  mortgage,  made  for  the  cost  of  the  lot,  becomes  the  first.  But  if  desired 
money  may  now  be  borrowed  from  the  building  and  loan  association  on  a  new  series 
to  pay  off  this  original  debt  on  the  lot.  The  advantage  of  this  is  that  the  debt  is 
finally  cancelled  by  the  easy  payments  to  the  building  and  loan  association,  whereas 
it  might  be  irksome  to  pay  it  all  off  at  one  time. 

There  are  many  variations  in  the  details  of  plans  for  building  and  loan  payments, 
loans,  premiums,  discounts,  etc.     These  are  fully  discussed  in  another  chapter. 


Land  loan  banks  are  co-operative  savings  and  loan  associations,  made  up  chiefly 
of  farmers.  They  originated  in  Germany,  and  have  their  highest  development  there, 
though  they  are  now  extending  over  many  parts  of  Europe.  They  are  the  applica- 
tion to  a  farming  population  of  exactly  the  same  principle  which  has  been  so  suc- 
cessful in  the  United  States  in  building  and  loan  associations  for  industrial  popula- 
tions. In  the  building  and  loan  association  payments  are  made  at  periods  that  suit 
the  manner  of  income  of  most  of  its  members.  This  is  naturally  by  the  week  or  by 
the  month.  For  an  association  of  farmers  the  payments  must  be  made  to  coincide 
substantially  with  the  marketing  of  the  crops.  For  the  United  States,  such  an  asso- 
ciation of  farmers  in  the  Northwest  would  naturally  fix  the  payments  to  coincide 
with  the  marketing  of  wheat,   in  Kansas  with  the  marketing  of  corn,  and  in  the 


$1000  HOUSES. 


PAID  FOR  IN  6y2  YEARS.    DUES,   PER  MONTH,  $10  ;   INTEREST,  $5  ; 
TOTAL    $15.    LOT    NOT    INCLUDED. 


South  with  the  marketing  of  cotton.  Thus,  instead  of  paying  by  the  week,  52  times 
a  year,  or  by  the  month,  which  would  be  impracticable  for  a  farmer,  the  payments 
would  be  made  in  about  three  instalments,  one  month  apart,  as  crops  mature  and 
are  marketed. 

For  the  organization  of  a  land  loan  bank  among  cotton  farmers,  for  example, 
the  charter  and  by-laws  are  prepared  and  the  subscription  or  membership  list  is 
completed.  Suppose  shares  are  made  $100  each,  and  payments  are  fixed  at  $13  a 
year  a  share.  Cotton  matures  all  through  the  fall  months,  beginning  about  Septem- 
♦)3r  1  and  ending  about  December  15.    The  marketing  begins  about  September  15  and 


ends  about  January  1.  To  suit  these  conditions,  the  instalment  dates  for  cotton 
farmers  might  be  made  October  1,  November  1,  December  1  and  January  1.  This 
would  make  four  instalments  each  year.  For  a  farmer  carrying  two  shares  ($200) 
the  yearly  payments  would  be  $26,  or  $6.50  on  each  of  these  dates. 

Assuming-  that  we  have  an  organization  of  100  farmers,  and  that  the  shares  car- 
ried by  the  members  (some  with  one,  some  with  two,  some  with  five,  some  ten,  etc.) 
should  average  $300  each,  then  the  annual  aggregate  savings  would  be  $3900.  The 
board  of  directors  would  lend  out  this  money  to  the  members.  One  member  having 
five  shares  may  borrow  $500  to  lift  a  mortgage  on  his  farm.  The  association  or  land 
bank  takes  the  mortgage  to  secure  regular  payment  of  future  dues  and  interest  by 
the  borrower.  Every  payment  of  dues  cancels  so  much  of  the  debt,  and  when,  in 
from  six  to  seven  years,  the  instalments  paid,  together  with  the  interest  or  profit 
credited,  equal  the  face  value  of  the  stock,  the  mortgage  is  given  up  and  cancelled, 
and  the  debt  is  at  an  end. 

When  the  first  building  and  loan  associations  were  established,  more  than  50 
years  ago,  those  who  were  most  sanguine  never  indulged  the  expectation  that  they 
could  ever  approximate  the  vast  accumulations  of  money  which  have  actually  been 
made.  Working  people,  most  of  whom  had  little  or  no  accumulated  capital,  formed 
a  class  among  whom  past  experience  justified  no  hope  of  great  savings.  The  results 
which  have  actually  been  accompanied  by  these  people  could  not  possibly  have  been 
conceived  in  the  early  days  of  these  organizations. 

The  same  is  true  also  with  the  German  land  loan  banks.  These  were  organized 
originally  (and  remain  even  now)  mainly  amongst  poor  farmers.  But  the  aggregate 
accumulations  of  these  banks  have  become  a  financial  power  in  Germany.  Formerly 
these  associations  of  farmers  borrowed  money  from  city  banks  to  lend  their  members. 
They  sometimes  do  this  yet,  especially  the  new  ones ;  but  the  older  ones  now  lend 
money  to  the  city  banks.  The  large  commercial  banks  of  Berlin  now  have  vast  sums 
on  deposit  belonging  to  the  land  loan  banks.  Some  of  these  co-operative  banks  have 
as  many  as  1500  members.  The  co-operative  instalment  savings  and  loan  principle 
has  been  worked  out  for  the  farming  interests  of  Germany  along  the  same  lines  as 
for  the  industrial  workman  in  the  United  States. 

These  instances  are  sufficient  to  show  what  the  workingman,  mechanic  or  farmer 
can  do  if  he  has  a  chance.  No  reason  is  apparent  why  the  German  industrial  work- 
ers should  not  adopt  the  American  industrial  savings  system,  nor  why  the  American 
farmers  should  not  adopt  the  German  farmers'  savings  system  with  the  greatest 
advantage  to  both  classes. 

Isolated  and  in  debt  to  a  city  bank  or  merchant,  the  farmer  often  desponds.  He 
sometimes  first  evades,  then  repudiates  his  debt.  In  an  association  of  his  own  people, 
his  neighbors,  he  could  not  afford  to  do  this.  His  neighbors  would  not  let  him  do  it. 
In  a  land  loan  association  he  can  borrow  a  reasonable  sum,  secured  by  land,  live- 
stock or  any  other  good  collateral  (the  same  which  is  now  necessary  to  get  advances), 
and  pay  off  the  debt  by  instalments.  The  instalment  payment  at  any  one  time  never 
seems  to  be  an  impossibility.  The  payments  come  in  sums  that  are  not  discour- 
aging. His  neighbors,  members  of  the  same  association,  are  interested  to  see  him 
get  along  with  his  payments.  The  encouragement  afforded  by  this  interest  on  the 
part  of  his  neighbors,  and  the  knowledge  that  he  will  forfeit  their  esteem  if  he  gives 
up,  constrains  every  member  to  carry  out  all  his  promises,  or  at  least  to  do  his 
utmost.  All  these  influences  put  together  are  enough  to  make  the  difference  between 
success  and  failure.     They  are  enough  to  change  the  farmers  from  a  debtor  class  to 


8 

a  creditor  class.  The  farmer  is  the  great  producer,  aud  with  this  system  of  being 
his  own  banker  he  can  save  for  himself  something  of  value  out  of  each  year's  product. 
Many  Scotch  banks  practice  with  farmers  a  system  called  "cash  credit."  Four  to 
twelve  farmers,  or  even  more,  get  together  and  form  a  sort  of  partnership  to  borrow 
money  jointly.  This  is  obviously  the  aggregation  of  farm  labor  as  a  basis  of  credit 
similar  to  that  of  the  German  land  loan  bank.  The  bank  makes  a  contract  with  the 
aggregation.  Suppose  five  neighboring  farmers  combine  and  jointly  make  a  contract 
writh  the  bank  for  "cash  credits"  to  the  extent  of  $1000.  They  agree  amongst  them- 
selves what  part  of  the  sum  each  man  may  draw.  They  are  each  and  severally,  how- 
ever, responsible  for  the  entire  amount,  or  so  much  of  the  entire  amount  as  may  be 
drawn  out.  The  bank  opens  an  account  with  each  member  of  the  borrowing  associa- 
tion, and  for  each,  separately,  cashes  checks  and  credits  deposits.  Interest  at  4  per 
cent,  per  annum  is  charged  on  the  average  balance.  Tlius  each  man  pays  a  very  low 
rate  of  interest,  and  pays  only  for  the  actual  time  the  money  is  out  of  the  bank. 

What  makes  this  feasible  is  that  the  Scotch  banks  are  allowed  by  law  to  issue 
bank  notes  on  their  good  assets.  This  privilege  is  coupled  with  the  condition  (among 
others)  that  the  bank  must  redeem  its  notes  in  gold  on  demand.  These  conditions 
never  give  serious  trouble.  A  Scotch  bank  is  always  in  position  to  issue  bank  notes 
in  the  crop-producing  season  and  cancel  them  in  the  crop-marketing  season.  This 
plan  saves  the  bank  from  having  to  rediscount  notes,  and  in  cases  of  financial  stress 
the  bank  can  always  save  its  own  home  people  with  its  own  notes. 

This  same  feature  of  Scotch  banking  is  also  of  great  assistance  to  merchants  and 
manufacturers.  It  is  an  elastic  feature  that  has  saved  Scotland  from  many  a  panic, 
besides  providing  at  all  times  cheap  and  sound  money  for  farmers  and  merchants  and 
manufacturers. 

In  American  building  and  loan  associations  each  stockholder  is  independent  of 
all  the  others  as  to  obligations,  no  one  guaranteed  for  any  other.  In  the  land  loan 
banks  of  Germany  sometimes  the  stockholders  individually  guarantee  the  debts  of 
the  bank,  aud  sometimes  not.  In  Scotland  the  number  of  men  in  each  separate 
set  of  borrowers  from  the  note-issue  bank  is  very  small,  generally  five  to  ten.  In 
these  cases  the  parties  do  guarantee  for  each  other  all  their  indebtedness  to  the  bank. 
This  makes  this  system  rank  as  one  of  the  co-operative  institutions. 

Co-operative  banks  of  Massachusetts  are  practically  a  form  of  the  building  and 
loan  association,  authorized  and  controlled  by  the  State.  The  sums  of  money  accu- 
mulated in  them  by  the  working  and  other  people  of  Massachusetts  are  astonishingly 
large,  and  would  be  beyond  belief  except  for  the  fact  that  while  they  have  the  fea- 
tures of  good  building  and  loan  associations,  they  are  treated  by  the  State  as  banks. 
They  are  regularly  examined,  and  are  subject  to  regulation  the  same  as  other  banks. 
The  building  and  loan  associations  of  Ohio,  like  those  of  Massachusetts,  are  all 
subject  to  State  banking  laws. 

There  are  other  systems  of  co-operative  savings,  but  these  illustrations  are 
enough  to  show  the  utility  of  the  system  when  a  proper  plan  for  its  application  is 
worked  out  and  put  into  operation.  By  the  land  loan  bank  system  thousands  of 
poor,  despondent  and  debt-ridden  farmers  in  Europe  have  paid  off  mortgages  or 
bought  land,  live-stock  and  other  equipment.  They  have  changed  their  condition 
from  one  of  depression  to  one  of  independence.  They  were  formerly  always  debtors 
to  the  land-owners,  merchants  or  banks.  Their  aggregate  savings  deposit,  through 
co-operative  associations,  now  make  them  large  creditors  of  the  commercial  banks  in 
financial  centers. 


9 

By  the  building  and  loan  association  thousands  of  wage-workers  in  the  United 
States  who  formerly  l-ented  cheap  houses  at  high  rent  have  been  enabled  to  build 
houses  themselves,  and  in  many  cases  to  build  other  houses  to  rent  to  less  thrifty 
people  and  to  acquire  other  property  besides.  The  great  number  of  blocks  of  neat 
two-story  brick  houses  belonging  to  workingmen  in  Philadelphia  and  Baltimore,  and 
the  rows  of  neat  frame  cottages  on  good  large  lots,  with  flower  gardens  in  front  and 
vegetable  gardens  in  the  rear,  belonging  to  the  working  people  of  Charlotte,  N.  C, 
attest  the  value  of  the  system. 

If  the  American  farmer  would  adopt  the  co-operative  system,  as  German  farmers 
have  done  in  their  land  loan  banks ;  if  the  German  mechanics  would  adopt  it  as  the 
American  mechanic  has  done  in  building  and  loan  association,  then  the  value  of  the 
system  would  be  doubled  in  both  countries. 


10 


CHAPTER    III. 

Essential  Principles  of  Building  and  Loan  Associations. 

The  first  requisite  of  a  savings  institution  is  that  it  must  be  safe.  In  the  discus- 
sion of  these  co-operative  associations  an  effort  will  be  made  to  exhibit  on  the  one 
hand  the  conditions  which  are  necessary  for  safety,  and  on  the  other  hand  those  con- 
ditions which  have  contributed  most  to  failures  among  so-called  co-operative  savings 
institutions. 

The  development  of  the  life  insurance  business  has  led  to  many  schemes,  based 
apparently  on  the  same  general  principles  which  govern  life  insurance,  some  of  which 
were  mistakes,  and  many  of  which  were  swindles.  The  beneficent  features  were 
always  put  in  evidence,  but  the  errors  and  cheats  could  not  always  be  seen  until  it 
was  too  late.  Life  insurance  has  survived  in  spite  of  multitudinous  mistakes  and 
swindles  perpetrated  in  the  name  of  life  insurance.  It  has  survived  because  there 
was  enough  good  in  it  to  save  the  general  principles  under  which  it  somewhat  equal- 
izes human  burdens. 

The  building  and  loan  association  has  been  the  victim  of  the  same  sort  of  vicissi- 
tudes. Many  mistakes  have  been  made,  and  many  swindles  have  been  perpetrated, 
but  there  are  too  many  families  living  in  their  own  homes,  which  have  been  bought 
through  the  building  and  loan  associations,  and  which  could  not  have  been  bought 
in  other  ways,  to  let  the  principle  of  the  co-operative  institution  be  driven  out.  Mis- 
takes and  swindles  will  tend  to  be  eliminated,  and  the  system  will  become  still  more 
extensively  developed.  No  practical  reason  appears  why  American  farmers  should 
not  adopt  and  apply  the  system,  as  well  as  American  mechanics  already  do,  and  as 
well  as  German  farmers  already  do. 

The  laws  of  the  various  States  should  classify  and  forbid  what  are  known  to  be 
errors  in  the  methods  of  co-operative  associations.  They  should  severely  punish 
those  who  perpetrate  or  attempt  to  perpetrate  swindles  upon  the  people  under  the 
guise  of  operating  a  building  and  loan  association.  Sometimes  an  association  is 
organized  with  the  best  intentions,  but  subsequently  falls  under  incompetent  or  dis- 
honest management.  Therefore,  it  is  important  for  the  State  to  inspect  and  regulate 
the  management  of  building  and  loan  associations,  just  as  it  inspects  and  regulates 
the  management  of  banks  and  life  insurance  companies. 

Indeed,  while  the  building  and  loan  association  is  capable  of  bringing  to  a  people 
the  most  beneficent  results,  the  abuse  of  the  name  or  of  the  appearance  of  the  prin- 
ciple gives  the  best  possible  opportunity  for  fraud  by  extortion  and  otherwise. 

The  best  form  of  association  would  seem  to  involve  the  following  points  : 

First.     It  should  be  local. 

Second.  Its  intervals  of  payment  should  be  suited  to  the  average  usual  manner 
of  income  of  its  members. 

Third.  Its  rules  as  to  prompt  and  regular  payments  should  be  rigid,  and  should 
be  rigidly  enforced. 

Fourth.     Its  shares  should  be  $100  par  value,  and  the  interest  rate  0  per  cent. 

Fifth.  Loans  should  be  made  in  the  order  of  application  for  them,  and  should 
be  made  at  the  par  value  of  $100  a  share,  without  discount,  bidding,  premium  or 
reducl  ion  of  any  kind. 


11 

Close  association  is  a  sharp  spur.  People  living  in  the  country,  where  families 
are  considerably  separated,  are  rarely  so  careful  about  neatness  as  those  who  live 
in  towns  and  cities.  The  influence  of  doing  things  jointly,  too,  is  always  strong. 
Association  with  a  number  of  other  people,  many  of  whom  one  knows  and  is  likely 
to  meet  at  intervals  in  social  life  or  in  business,  rarely  fails  to  stimulate  the  indi- 
vidual to  his  best  endeavors  to  do  his  part  in  any  organization  as  well  as  the  average, 
or  better.    Club  members  usually  regard  club  dues  as  a  first  debt  to  be  paid. 

The  moral  influence  of  local  and  social  association  has  its  effect  upon  the  officers 
of  an  organization,  as  well  as  on  the  members.  Where  the  members  have  easy  access 
to  the  officers,  and  meet  them  in  daily   life,  the  opportunity  and  the  desire  to  do 


A   BLOCK  OF  CITY  HOMES.     $3000  HOUSE.  PAID  FOR  IN  t>y2  YEARS.     DUES  PER 
MONTH  $30  ;  INTEREST  $15  ;  TOTAL  $45.     LOT  NOT  INCLUDED. 


wrong  are  minimized.  Here  again  is  seen  the  effect  of  aggregated  influences.  The 
officers  are  encouraged  and  constrained  to  do  right  by  the  elbow  touch  of  the  entire 
membership. 

The  co-operative  savings  institution,  to  be  successful,  must  be  of  a  kind  that 
aggregates  the  strength  and  influence  of  its  members,  and  it  must  also  be  so  situated 
that  this  aggregate  influence  is  always  upon  its  officers,  thus  constraining  in  them 
the  greatest  circumspection,  and  constraining  each  member  to  the  highest  degree  of 
effort  to  keep  himself  straight  with  his  associates.  In  local  institutions  the  conscious- 
ness of  oversight  stimulates  each  member  to  keep  his  property  in  better  shape,  pay 


12 

his  dues  and  interest  with  unfailing  regularity,  and  be  sober,  industrious  and 
economical. 

The  system  may  be  varied  in  many  ways  as  to  payments,  fines  and  other  regula- 
tions, to  suit  different  conditions ;  but  the  aggregation  feature,  in  some  form  or  other, 
must  always  be  preserved.  The  meaning  of  this  is  that  the  great  bulk  of  the  members 
must  know  each  other,  or  at  least  be  near  enough  together  to  attend  meetings  in  case 
of  trouble,  and  that  loans  must  be  made  only  on  property  so  situated  that  it  may  be 
readily  visited  by  an  examining  committee,  and  may,  if  occasion  requires,  be 
inspected  and  passed  upon  by  the  bulk  of  the  members.  This  means  that  all  the 
property  taken  for  security  must  be  within  a  limited  local  area,  say  a  city  or  a  town- 
ship, and  that  most  of  the  members  must  live  within  this  area.  The  character  of  a 
member  who  borrows  is  an  important  element  in  the  security  of  the  loan.  It,  as 
well  as  the  mortgaged  property,  ought  to  be  under  the  observation  of  the  members. 

These  considerations  establish  the  first  condition,  namely,  the  successful  building 
and  loan  association  must  be  local.  Any  limit  is  suitable  within  which  people  are 
likely  from  time  to  time  to  see  something  of  each  other.  Ten  miles  is  of  little  conse- 
quence to  a  farmer,  who  has  facilities  for  the  trip,  and  has  the  habit  of  traveling 
more  or  less  over  the  country,  while  for  a  machinist  it  would  be  both  inconvenient 
and  unusual  to  go  into  the  country  to  inspect  property.  It  would  not  be  advisable 
for  an  association  made  up  of  workers  in  industrial  pursuits  in  the  town  or  city  to 
take  farm  property  lying  at  a  distance  in  the  country.  In  such  an  association  prop- 
erty accepted  for  security  must  be  in  the  town  or  city  and  the  immediate  environs. 
If  farmers  should  undertake  this  sort  of  savings  and  loan  association  the  county  lines 
would  usually  enclose  a  territory  that  would  be  "local"  within  the  meaning  intended. 

Membership  need  not  be  rigidly  restricted  to  locality.  Most  of  the  members 
should,  however,  always  come  from  the  territory  in  which  the  securing  property  is 
to  be  taken.  Indeed,  the  purpose  of  the  association  is  that  home  people  may  save 
home  money  to  buy  houses  to  live  in  or  to  do  business  in,  or  that  they  may  lay  by 
something  against  a  rainy  day,  or  to  make  old  age  comfortable,  or  to  raise  and 
educate  a  family  of  children. 

Many  so-called  building  and  loan  associations  have  been  formed  on  plans  that 
were  totally  wanting  in  the  essential  features  of  co-operation.  These  spurious  insti- 
tutions are  made  up  of  members  widely  scattered,  few  of  whom  ever  see  the  officers. 
It  stands  to  reason  that  the  very  scattered  condition  of  the  members  of  such  an  insti- 
tution prevents  co-operation,  and  creates  the  very  best  opportunity  for  the  officers 
to  swindle  the  stockholders.  These  institutions  are  generally  called  national  or 
interstate  building  and  loan  associations.     Most  of  them  have  failed. 

With  possibly  a  few  exceptions,  they  have  somebody  in  some  way  connected  with 
them  who  practices  impositions  on  the  members.  The  representative  of  these  organ- 
izations, when  discussing  a  subscription  for  stock,  always  shows  how  easy  it  is  to 
withdraw;  when  later  on  application  to  withdraw  is  made,  it  is  not  found  so  easy. 
In  one  case  a  stockholder  in  Texas  made  application  to  withdraw  from  an  Eastern 
association.  He  had  paid  in  $360,  and  was  entitled  under  the  by-laws  to  withdraw 
this  amount,  together  with  some  slight  profit.  In  answer  to  his  application,  he  was 
advised  by  the  secretary  of  the  association  that  there  was  no  money  available  for 
paying  off  withdrawing  stock,  and  that  there  would  be  none  available  for  nearly  a 
year,  or  perhaps  more  than  a  year.  The  secretary  had  a  friend,  however,  who  would 
buy  his  stock  for  $250.  What  is  the  Texas  man  to  do,  being  1000  miles  away? 
Counting  the  cost  of  a  lawsuit  or  a  trip,  he  finds  it  cheaper,  less  trouble  and  more 


18 

expeditions  to  accept  the  offer.  The  secretary  is  his  own  friend.  As  soon  as  the 
secretary  received  the  stock  he  proceeds  at  once,  according  to  the  by-laws,  to  draw 
$360  with  the  profit  added. 

In  many  ways  institutions  which  have  stockholders  much  scattered  are  liable  to 
fall  into  bad  habits.  They  may,  in  perfect  honesty,  make  loans  at  distant  points 
through  local  boards  on  property  of  far  less  value  than  the  cash  loaned.  This  error 
has  been  extensively  committed,  to  the  disappointment  and  injury  of  the  stockholders 
when  the  time  came  for  final  settlement.  Mortgages  which  instalments  should  have 
cancelled  in  six  or  seven  years  have  run  eight  or  ten  years,  and  even  more,  because 
of  bad  loans  on  inadequate  security  or  bad  conduct  in  the  home  office,  or  both. 

Notwithstanding  these  objections,  it  is  not  impossible  that  under  certain  favor- 
able conditions  or  influences  there  might  be  devised  an  interstate  or  national  associa- 
tion which  could  be  made  secure  and  desirable. 

Exact  knowledge  of  the  condition  of  a  corporation  by  the  stockholders  and  by 
those  who  may  wish  to  become  investors,  and  a  method  for  calling  the  officers  back 
to  regular  operations  (under  the  by-laws  if  necessary),  are  essential  to  fair  dealing 
with  the  people.  Up  to  a  certain  point  these  things  may  best  be  secured  by  localizing. 
When  this  is  impracticable,  or  not  enough,  some  plan  of  legal  regulation  and  restric- 
tion is  absolutely  necessary. 

It  long  since  came  to  pass  that  the  people  demanded  regulation  and  restriction 
of  banks,  and  the  publication  of  their  statements  in  prescribed  forms.  Regulation 
and  restriction  of  the  insurance  business  has  also  been  permanently  established. 
Some  degree  of  regulation  and  restriction  of  railroad  management  and  publication 
of  rates  has  been  obtained.  A  number  of  manufacturing  interests  have  been  more 
or  less  combined  or  consolidated,  but  so  far  no  regulation,  restriction  or  publicity  of 
accounts  of  any  value  has  been  attempted  with  reference  to  them. 

Those  interests  where  regulation,  restriction  and  publicity  of  accounts  are  most 
complete  have  securities  which  are  more  attractive  to  the  investor  than  those  which 
work  under  cover.  Government  bonds,  publicly  issued  and  publicly  handled,  bring 
the  highest  prices  and  bear  the  least  interest.  The  stocks  of  national  banks,  next 
best  and  most  publicly  regulated,  bring  the  next  highest  price  with  the  next  lowest 
interest.  Insurance  companies  come  next.  Railroads  come  next.  Stocks  of  indus- 
trial combinations,  practically  not  regulated  at  all,  come  comparatively  low.  An 
industrial  stock  drawing  7  per  cent,  preferred  and  cumulative  dividend  will  bring, 
say,  90  per  cent,  of  par  value ;  a  railroad  stock  paying  the  same  will  bring  150,  a 
national  bank  stock  200,  and  a  government  bond,  if  there  were  any  such,  would 
bring  250. 

There  has  been  much  criticism  of  the  tendency  to  find  fault  with  combined  corpo- 
rations or  trusts.  But  it  should  be  observed  that  the  objection  is  not  to  the  magni- 
tude or  the  legitimate  profits  of  a  corporation.  There  has  been  consolidation  of 
banking  interests  in  New  York  aggregating  enormous  sums,  yet  no  serious  criticism 
has  been  made.  There  are  some  other  complaints  against  the  banking  law ;  the  system 
is  not  flexible,  and  does  not  sufficiently  seive  the  interests  of  the  whole  people ;  but  the 
matter  of  size  and  profit  creates  no  serious  prejudice.  The  knowledge  of  the  condi- 
tion of  national  banks,  which  is  disseminated  by  the  government,  satisfies  people 


14 

about  all  questions  relating  to  capital,  issues  of  stock,  conduct  of  business  and  other 
such  matters. 

The  only  way  to  insure  success,  or  a  reasonable  probability  of  it,  to  a  building 
and  loan  association  operating  on  the  national  or  interstate  plan  would  be  by  govern- 
ment restriction  and  control,  with  examination  and  publication  of  accounts  by  good 
experts  like  the  national  bank  examiners. 

With  such  examination,  publicity  and  control  such  organizations  might  be  made 
not  only  safe,  but  advantageous  both  to  the  investing  stockholders  and  to  the  bor- 
rowing stockholder.  The  prosperous  locality,  where  money  for  investment  is  more 
or  less  plenty,  could  then  furnish  money  to  invest  in  less  favored  sections.  People 
having  valuable  resources  in  less  developed  localities,  by  joining  such  an  association, 
could  borrow  money  at  a  lower  rate  than  in  any  other  way ;  the  transaction  would 
be  profitable  to  themselves  and  to  the  investing  members. 

In  the  absence  of  laws,  or  with  inefficient  laws  for  control  and  regulation,  the 
interstate  plan  of  association  had  better  be  let  alone.  The  time  may  come  when, 
under  control  and  regulation,  it  may  become  all  right ;  but  it  is  not  yet. 

The  next  important  condition  for  a  successful  association  is  that  regular  and 
prompt  payment  be  secured.  To  this  end  the  times  of  payment  should  be  fixed  to 
correspond  with  the  usual  pay-days  at  the  various  works,  stores  and  other  institu- 
tions in  the  town  or  city.  An  association  of  farmers  would  naturally  fix  their  instal- 
ments to  suit  the  marketing  of  their  crops,  having  them  come  quickly  on  the  heels 
of  their  principal  sales. 

Whatever  the  appointed  times  of  payment,  strict  observance  of  them  should  be 
rigidly  required.  One  of  the  most  wholesome  and  advantageous  influences  of  the 
land  banks  of  Germany  has  been  the  education  of  the  farmer  to  a  knowledge  of  what 
prompt  payment  means. 

Most  of  us  need  just  a  little  pressure  to  make  us  do  fairly  by  ourselves  in  the 
matter  of  husbanding  the  fruits  of  our  labor.  Working  people  are  usually  rather 
liberal  and  generous,  and  there  is  always  a  crowd  of  human  parasites  that  live  on 
the  labor  of  others.  If  the  savings  institution  would  succeed  among  workingmen. 
it  must  shape  its  rules  so  that  they  may  and  must  pay  in  their  money  before  these 
parasites  can  get  it.  Once  satisfy  the  member  that  the  instalments  paid  in  are  safe, 
and  to  his  own  account,  and  he  is  willing  enough  to  pay  in  his  money  whenever  he 
has  it:  but  if  he  must  wait  long,  or  even  if  he  may  wait  long,  his  money  is  likely  to 
go  before  he  knows  it,  and  in  ways  that  are  unaccountable  even  to  himself.  It  is 
important,  therefore,  to  make  the  instalments  suit  pay-days,  to  fix  a  fine  to  enforce 
payment,  and  to  be  strict  in  requiring  that  payments  be  prompt.  It  is  not  desirable 
to  be  so  inflexible  in  the  enforcement  of  rules  as  to  cause  hardship ;  temporary  failure 
to  pay  on  account  of  unavoidable  accidents  or  sudden  and  temporary  sickness  should 
be  judiciously  overlooked  occasionally.  This  should  be  done,  however,  only  in  special 
cases. 

The  plan  of  bidding  for  loans,  though  not  so  disastrous  as  that  of  scattering  the 
members,  is  very  undesirable.  By  this  plan  the  money  is  loaned  by  auction,  as  it 
were.     Whoever  bids  to  accept  a  loan  at  the  greatest  discount  gets  it.     Sometimes 


15 

the  bid  is  5  per  cent,  discount,  or  "premium,"  as  it  is  called.  Sometimes  it  is  10  per 
cent.,  and  even  higher.  As  much  as  40  per  cent,  has  been  known  to  be  bid.  This  is 
taking  advantage  of  the  needs  of  members  in  a  very  unfair  way.  Where  two  men 
want  money  it  would  be  much  better  to  accommodate  both  without  discount,  and  in 
the  order  of  their  application. 

Some  associations  have  had  a  fixed  discount  or  "premium."  In  Bethlehem,  Pa., 
a  fixed  premium  of  12  per  cent,  was  popular  some  years  ago,  but  is  now  abandoned. 

By  far  the  best  way  is  to  have  applicants  for  loans  listed  in  order,  and  to  assign 
accumulated  money  in  regular  order  and  at  par,  according  to  the  list.  By  knowing 
the  rate  of  income  of  the  association  and  the  aggregate  of  applications  ahead,  any  one 
applicant  can  be  told  with  approximate  accuracy  when  he  can  get  the  money  applied 
for.  Knowing  this,  he  can  easily  make  his  arrangements  without  being  harassed,  as 
he  might  often  be  if  bidding  had  to  be  done  to  get  a  loan. 


10 


CHAPTER    IV. 

Opportunities  and  Benefits. 

The  building  and  loan  association  is  not  in  itself,  even  in  its  best  form,  a  prim- 
rose path  to  fortune.  It  is,  in  a  feeble  way,  and  for  this  world,  like  the  plan  of 
salvation.  It  is  simply  an  opportunity  to  those  who,  in  its  absence,  might  despond 
and  be  lost.  It  does  nothing  for  the  man  or  woman  who  is  unwilling  to  try.  In  this 
chapter  will  be  discussed  the  opportunities  it  furnishes. 

It  makes  a  great  difference  whether  the  operations  of  a  building  and  loan  asso- 
ciation are  conducted  in  a  growing  town  or  in  one  that  is  retrograding  or  standing- 
still.  In  a  progressive  town  rents  are  high.  Therefore  in  a  progressive  town  rents 
will  come  nearer  paying  dues  and  interest  on  a  loan  to  build  a  house  than  in  a  town 
that  is  not  progressive. 

To  the  individual  the  opportunity  is  simply  a  question  of  getting  wages.  Even 
in  a  slow  town  and  at  cheap  rent  a  family  would  be  better  off  to  join  an  association 
and  build  a  house  for  themselves.  Many  a  time  in  Pennsylvania  and  North  Caro- 
lina the  first  dawn  of  awakening  and  prosperity  for  a  town  has  been  due  to  the  act 
of  the  working  people  in  the  organization  of  a  building  and  loan  association.  When 
working  people  abandon  rented  houses  and  apply  their  wages  to  payments  on  houses 
of  their  own,  then  capitalists  are  compelled  to  make  investments  in  enterprises  that 
make  more  occupation,  more  wages  and  more  wealth.     I  will  give  some  examples. 

While  working  as  a  machinist  and  in  other  capacities  for  the  Bethlehem  Iron  Co. 
in  Pennsylvania,  I  saved  money  enough  to  buy  a  lot.  I  joined  a  building  and  loan 
association  and  borrowed  money  enough  to  build  a  house  on  the  lot.  The  par  value 
of  a  share  was  -$200.  I  subscribed  for  and  borrowed  on  seven  shares,  making  a  mort- 
gage debt  of  $1400  at  6  per  cent,  interest.  The  dues  on  the  shares  were  $7  a  month, 
and  the  interest  ($1400  at  6  per  cent.)  was  $7  more.  This  made  $14  a  month  1  had 
to  pay.  It  required  about  10  years  for  the  stock  to  mature  and  bring  the  shares  to 
the  par  value  of  $200.  I  rented  the  house  for  $15  a  month.  While  I  had  to  pay 
$14  a  month  for  10  years  to  own  the  house,  the  tenant  paid  me  $15  a  month,  and  at 
the  end  of  10  years  he  owned  none  of  the  property  he  had  paid  for. 

I  owned  a  lot  of  about  75  feet  frontage  on  College  strpet  in  Charlotte,  N.  C,  with 
one  negro  cabin  on  it.  I  reconstructed  the  cabin  to  make  a  neat  workingman's  cot- 
tage with  two  rooms  and  kitchen.  I  built  two  other  similar  cottages,  each  on  25 
feet  of  the  lot.  The  reconstruction  of  the  old  cabin  into  a  cottage  cost  $100.  The 
new  cottages  cost  me  $250  each.  I  borrowed  $600  from  the  building  and  loan  asso- 
ciation. This  required  six  shares  at  $100  each.  Dues  were  $6  a  month ;  interest 
at  6  per  cent,  was  $3,  making  $9  a  month.  The  houses  rent  for  $4  a  month  each. 
I  pay  out  $9  and  collect  $12.  In  six  and  one-half  years  the  tenants  pay  for  the  cot- 
tages for  me  and  pay  me  a  surplus  besides. 

In  both  the  above  cases  there  are  some  expenses,  such  as  insurance,  taxes  and 
repairs,  which  have  not  been  taken  into  account.  Both  are  rather  exceptional  and 
favorable  cases.  But  even  when  rent  money  can  be  made  to  pay  for  a  house  a  man 
will  sometimes  figure  and  figure  to  show  that  a  bank  loan  at  simple  interest  is 
cheaper  than  a  loan  from  the  building  and  loan  association. 

Even  when  an  ordinary  loan  can  be  made,  the  differential  cash  advantage  of  it 


17 

over  the  building  and  loan  method  is  of  small  consequence.  The  main  difference  is 
chat  the  building  and  loan  plan  leads  the  borrower  gently,  easily  and  surely,  though 
somewhat  forcibly,  out  of  debt.  If  it  is  a  home  he  has  built,  his  mortgage  is  being 
every  week  reduced,  and  will  certainly  be  cancelled  at  the  end  of  the  term  of  the 
series.  By  any  other  plan  of  borrowing,  maturities  of  debt  and  interest  are  far 
apart.  Interest  alone  becomes  a  lump  sum,  and  unless  it  has  been  accumulated  by 
instalments  at  home  it  is  hard  to  pay.  Deficiencies  soon  bring  discouragement,  and 
by  discouragement  many  a  house  is  lost  and  goes  to  the  money-lender,  and  he  is 
blamed  for  what  is  no  fault  of  his.  The  trouble  is  that  the  workingman  has  no 
means  of  making  regular  small  payments  on  his  debt  at  intervals  when  he  has  the 
money,  and  in  the  absence  of  any  pressure  to  accumulate  it,  he  spends  it. 


A  $2000  HOUSE  ;  PAID  FOR  IN  6%  YEARS.     DUES  PER  MONTH  $20  ;  INTEREST  $10  ; 

TOTAL  $30.     LOT   NOT   INCLUDED. 

It  is  not  intended  to  argue  that  there  are  not  conditions  under  which  it  is  as 
well  or  even  better  to  borrow  from  commercial  banks  or  individuals.  This  discus- 
sion relates  to  a  plan  for  serving  advantageously  a  large  proportion  of  working- 
people  and  people  engaged  in  commerce  in  a  modest  way.  The  tremendous  success 
of  these  associations  leads  one  to  the  conclusion  that  90  per  cent,  of  all  the  houses 
built  through  them  could  never  have  been  built  by  borrowing  money  and  making  an 
ordinary  mortgage  to  a  money-lender,  bank  or  individual ;  or  if  they  had  been  built, 
more  than  one-half  would  never  have  been  paid  for  by  the  purchasers.  The  great 
advantage  of  the  building  and  loan  association  lies  in  the  instalment  payments  and 
the  little  coercion  to  compel  regularity. 


18 

It  is  sometimes  argued  that  the  early  borrowers  are  at  a  disadvantage.  They 
pay  interest  through  the  life  of  the  series,  while  the  last  man  pays  no  interest  at  all. 
It  is  forgotten  that  the  first  man  has  the  use  of  the  money  or  the  use  of  a  house 
rent  free  during  the  whole  life  of  the  series,  while  the  last  man  may  have  been  pay- 
ing rent  all  the  time.  If  a  borrower  uses  a  loan  to  pay  for  a  house  and  moves  into 
it  he  saves  his  former  rent  against  the  interest  paid.  The  dues  are  separate,  and 
go  to  pay  for  the  house,  which  none  of  his  rent  money  did.  Assuming  a  fair  oppor- 
tunity to  use  the  money  to  advantage,  it  is  just  about  as  profitable  to  be  the  first 
borrower  as  the  last  one.  While  no  credits  are  made  against  the  debt  on  account  of 
the  dues  that  are  paid,  the  debtor  is  participating  in  the  profits.  The  6  per  cent, 
he  pays  on  the  full  amount  is  somewhat  more  than  offset  by  his  share  of  the  profits 
of  the  association.  On  the  average,  when  shares  are  $100  each,  the  debtor  for  $1000 
pays  back  only  about  $S00,  besides  interest.  The  other  $200  is  his  share  in  the 
profits  or  accumulation  of  all  the  interest — his  own  and  others. 

The  advantage  is  greatest  for  working  people  living  in  houses  of  moderate  size 
and  cost.  This  is  not  because  the  landlord  is  extortionate.  Small  cottages,  frame 
or  brick,  are  necessarily  more  perishable  than  larger  and  more  expensively  built 
houses.  The  average  tenant  refuses  to  make  repairs  that  he  could  well  make.  He 
always  makes  the  landlord  spend  money.  Therefore  the  landlord  must  get  rent 
enough  to  pay  for  repairs.  Thus  the  tenant  pays  in  cash  for  something  that  he 
could  as  well  do  without,  and  would  do  if  he  owned  the  house. 

Besides  repairs,  the  workingman  can  make  improvements  often  without  cost. 
The  owner  of  a  property  always  finds  economical  means  to  better  it.  In  this  lies 
much  of  the  advantage  of  the  building  and  loan  association.  It  requires  a  man  to 
own  his  property  before  it  will  deal  with  him  at  all,  except  as  a  stockholder  and 
saver  of  money.  The  building  and  loan  association  is  perfectly  willing  to  advance 
the  money  necessary  for  a  man  to  buy  or  build,  but  it  will  not  consider  such  a  thing 
as  buying  property  for  a  member  to  reDt. 

In  the  two  examples  shown  it  has  actually  cost  no  money  to  buy  houses.  In  the 
great  majority  of  cases  the  rent  will  not  pay  all  the  interest  and  dues.  Sometimes, 
where  the  rent  is  $10  a  month,  it  will  take  $15  to  pay  dues  and  interest.  Meantime 
one  is  living  in  one's  own  house  rent  free.  Sometimes,  when  rent  is  $20,  the  interest 
and  dues  for  a  $2400  loan  would  be  $?>.">  a  month.  The  variations  are  innumerable. 
To  save  disappointment,  each  individual  must  figure  out  for  himself  the  case  lie  has 
under  consideration.  Some  cases  are  more  favorable  and  some  less,  but  I  have  not 
met  with  any  case  in  which  it  did  not  pay  a  workingman  to  join  a  building  and  loan 
association,  quit  renting,  build  a  house  and  apply  rent  money  toward  paying  for  it. 

The  building  and  loan  association  generally  requires  that  a  man  own  his  lot. 
Then  it  will  lend  money  to  build  a  house,  taking  a  first  mortgage  on  the  whole  prop- 
erty. Many  a  workingman  reflects  that  for  a  man  without  a  lot  the  plan  is  imprac- 
ticable. That  conception  is  a  mistake.  There  are  almost  always  opportunities  in  a 
town  for  a  workingman  to  buy  a  lot  on  long  credit,  with  the  privilege  of  building  a 
house  on  it  with  building  and  loan  money,  giving  a  first  mortgage  to  the  building 
and  loan  association  and  a  second  to  the  landowner.  At  first  blush  this  would  seem 
indiscreet  on  the  part  of  the  landowner.  On  consideration,  however,  almost  any 
landowner  and  all  the  land-development  companies  will  do  this.  Every  payment 
made  to  the  building  and  loan  association  is  a  reduction  of  the  first-mortgage  claim. 
Therefore,  soon  after  the  start  the  second  mortgage  is  perfectly  safe.     At  the  end 


19 

of  about  six  and  one-half  years  ($100  shares)  the  first  mortgage  is  paid  off,  and  the 
second  mortgage  becomes  the  first. 

Thus  a  workingman  may,  on  the  basis  of  his  sobriety,  honesty  and  industry,  buy 
a  lot  on  credit,  build  a  house  on  credit,  and  pay  for  the  house  in  about  six  and  one- 
half  years  through  the  building  and  loan  association,  keeping  up  the  interest  on  the 
lot  debt.  Then  he  can  transfer  the  lot  debt  to  the  association  and  pay  it  off  in  about 
six  and  one-half  years  more.  This  takes  12%  to  13%  years — a  long  time.  That's 
true,  but  reflect  that  the  start  was  with  nothing  and  the  end  was  the  ownership  of  a 
house  that  otherwise  never  would  have  been  owned. 

In  operations  of  American  building  and  loan  associations  the  majority  of  all 
loans  are  made  to  build  homes  for  members.  Loans  are  never  made  except  to  mem- 
bers. (This  rule  is  somewhat  modified  in  the  case  of  associations  in  the  State  of 
Ohio,  but  these  are  more  or  less  like  the  co-operative  banks  of  Massachusetts.) 
Members  who  have  satisfactory  security,  however,  borrow  money  for  any  purpose. 

To  mortgage  a  home  already  paid  for  is  generally  very  dangerous.  It  may  hap- 
pen, however,  where  conditions  are  favorable,  that  a  man  may  mortgage  a  home  to 
get  capital  to  enter  a  mercantile  business  which  promises  to  pay  for  itself  and  make 
money  in  addition.  Or  a  man  already  in  business  may  extend  his  business  or  get 
over  a  hard  time  by  means  of  the  building  and  loan  association.  A  merchant  can 
have  no  better  safeguard  against  a  panic  or  any  tight  time  than  a  fair  amount  ot 
building  and  loan  association  stock.  Ten  shares  are  always  good  for  $1000,  even 
when  the  banks  have  no  money  to  lend.  Merchants  who  own  some  real  estate  oftec. 
subscribe  for  and  carry  10  to  50  shares  ($1000  to  $5000  par  value),  in  order  thai 
if  in  their  business  they  should  at  any  time  be  pushed  for  cash,  it  may  always  be 
available  from  the  building  and  loan  association  by  application  in  regular  order.  It 
is  a  great  advantage  in  business  to  be  so  situated  as  to  know  where  a  sum  of  ready 
cash  may  be  had  at  any  time  when  needed.  Of  course,  this  involves  mortgaging 
some  real  estate,  but  when  shares  are  being  carried  the  debt  may  be  already  half 
paid  when  the  loan  is  made.  In  any  event,  the  repayment  of  the  debt  goes  on  at 
short  intervals,  and  in  that  respect  is  a  light  burden.  It  is  easily  paid  as  compared 
with  an  ordinary  mortgage,  which  cannot  be  reduced  until  due,  and  must  then  be 
paid  all  at  once.  In  the  latter  case  the  natural  tendency  of  human  nature  is  to 
hope  to  pay  the  debt  when  due,  but  not  to  make  prei    ration  in  time.     In  the  former 

^e  the  building  and  loan  association  permits  and  re  /uires  that  a  beginning  be  made 

at  once ;  that  regular  and  very  light  weekly  payments  be  made,  and  that  these  be 
regularly  continued  until  the  mortgage  is  paid  in  full  and  cancelled.  To  the  average 
man  it  looks  beforehand  as  though  it  would  be  a  hardship  to  have  to  keep  up  these 
payments.  After  starting,  however,  one  always  becomes  more  pleased  with  the  plan 
and  really  interested  to  learn  how  easy  it  is  to  accumulate  money  by  regular  savings 
or  pay  off  a  rather  ugly  debt  in  instalments  that  are  comparatively  insignificant. 

We  often  hear  that  such  or  such  a  successful  man  was  backed  by  some  friend 
who  helped  him  over  rugged  places.  I  know  a  number  of  successful  men  who  could 
not  have  succeeded  without  the  good  and  sure  backing  they  have  had.  The  backing 
has  been  by  no  man,  but  only  by  the  building  and  loan  association.  It  stands  like 
a  rock  behind  every  man  who  will  use  it  right.  It  can  never  be  made  the  victim  of 
prejudice,  and  can  never  be  brought  by  lies  or  conspiracy  to  desert  one  of  its  mem- 
bers in  need.  Fulfill  its  conditions,  and  its  help  is  ready  at  all  times  and  under  all 
circumstances. 

Aside  from  the  question  of  building  a  house  or  serving  as  security  for  a  business. 


20 

building  and  loan  shares  are  a  good  investment,  and  the  plan  is  the  very  best  for 
savings.  Every  young  man  could  with  advantage  carry  a  few  shares.  It  will  astonish 
any  young  man  to  find  how  his  savings  will  increase  with  regular  forced  payments. 
Many  a  mechanic  or  clerk  or  other  person  working  for  wages  will  trouble  him- 
self with  figuring  the  profit  on  money  saved  in  a  building  and  loan  association  to 
show  that  it  is  more  or  less  than  the  current  rate  of  interest.  For  capitalists  taking 
stock  for  investment  there  might  be  a  shade  of  difference  one  way  or  another,  that 
some  might  think  worth  considering.  But  even  for  a  capitalist  the  superior  safety 
of  this  investment  is  worth  a  shade  of  difference  in  interest  rate. 

For  the  average  workingman  such  a  calculation  is  foolishness.  In  the  great 
majority  of  cases  the  savings  are  all  profit  to  the  workingman.  Most  of  them  spend 
all  they  make,  whether  it  is  much  or  little. 

As  a  matter  of  fact,  the  profit  or  interest  averages  about  7  per  cent.  This  varies 
with  the  actual  rate  of  interest  charged  borrowers,  which  is  usually  6  per  cent.  It 
also  varies  with  the  expense  of  conducting  an  association  and  with  the  amount  of 
fines  imposed  and  collected. 

In  subscribing  for  shares  without  loans  no  serious  obligation  is  assumed.  There 
is  generally,  and  should  be  always,  provision  for  withdrawal  of  cash  paid  in,  with 
some  little  interest,  after  the  series  has  been  in  operation  for  more  than  two  years. 
(The  amounts  paid  for  expenses  for  the  first  two  years  or  more  are  usually  at  least 
as  much  as  the  accumulated  interest  for  those  two  years  on  the  small  sums  paid  in.) 
With  this  provision,  if  the  wage-earner  of  a  family  should  die,  the  membership  in 
the  building  and  loan  association  is  a  benefit,  and  no  disadvantage.  Any  accumu- 
lated money  is  an  advantage  to  the  widow  and  children,  regardless  of  interest. 

Sometimes  there  is  hesitancy  because  of  a  possibility  of  moving.  The  member- 
ship is  no  hindrance  to  moving.  The  money  paid  in  can  be  withdrawn,  or,  better 
still,  it  may  be  let  alone  and  the  payments  to  the  building  and  loan  association  at 
the  old  place  may  be  kept  up  from  the  new  home.  Even  a  great  distance  in  America 
makes  little  difference.  The  writer,  while  a  machinist,  left  Bethlehem,  Pa.,  and  went 
to  Missouri  as  a  master  machinist  of  a  manufacturing  company.  The  mails  carried 
the  building  and  loan  payments  back,  and  not  one  ever  failed.  The  possibility  of 
moving  is  no  reason  for  hesitation.  On  the  contrary,  wherever  there  is  a  good  and 
safe  local  building  and  loan  association  one  should  always  join,  because,  in  case  of 
moving,  there  might  not  be  one  in  the  new  place. 

A  well-conducted  savings  institution  is  like  a  church,  a  school  and  a  library. 
Everybody  ought  to  belong  to  one.  Join  the  others  first,  and  in  the  order  named,  but 
don't  quit  till  the  building  and  loan  association  is  reached.  Whoever  does  his  best 
in  these  four  institutions  will  stand  far  above  the  average  of  humanity. 

In  addition  to  the  profit  shown  in  figures  or  dollars  and  cents,  the  home-builder 
makes  other  gains,  which  show  themselves  in  better  citizenship  and  better  life : 

1.  He  puts  himself  in  position  to  utilize  his  spare  time  for  his  own  advantage. 
Improvements  he  can  make  on  the  house  are  all  his. 

2.  Flowers,  trees  and  vines  planted  are  all  his  own,  and  he  can  take  more  interest 
in  these  adornments  if  they  are  his  rather  than  his  landlord's.  This  ought  not  to  be 
so,  but  it  is  so. 

3.  It  raises  him  in  the  esteem  of  his  neighbors  to  become  the  owner  of  his  house. 
This  brings  him  better  opportunities. 

4.  It  settles  him  in  a  house  and  raises  him  above  the  transient  workman,  both 


21 

in  his  own  estimation  and  in  fact.  His  self-esteem  being  stimulated,  he  is  at  once 
a  better  man. 

5.  Having  a  home,  he  becomes  interested  in  the  local  church  and  the  local 
school.    He  learns  loyalty  to  his  town  and  patriotism  to  his  country. 

Taking  safety  into  consideration,  the  interest  or  profit  is  usually  more  than  a 

working-man  can  get  on  regular  savings  from  any  other  source.     In  addition  to  this 

profit,  the  workingman  gets  the  opportunity  to  shift  his  rent  money  to  the  payment 

of  a  house  for  himself,  and  in  some  few  cases  the  rent  money  actually  pays  the 

whole  dues  and  interest  or  the  whole  cost  of  the  house.    In  such  a  case  the  profit  is 

100  per  cent.,  aside  from  the  fact  that  in  many  cases  the  workingman's  savings  are 

all  profit,  because  the  money  would  have  been  spent  had  not  the  periodical  pressure 

of  the  building  and  loan  association  caused  him  to  save  it.     The  profits  might  be 

roughly  summarized  as  follows  : 

Per  cent. 

Interest 7 

Rent  saved 60 

Value  of  habit  of  regular  saving 60 

Improvements  made  on  house  with  home  labor 20 

Better  life  and  surroundings 60 

Total  profit,  financial,  moral  and  intellectual 207 

These  figures  as  to  moral  and  intellectual  results  are  simply  given  to  put  the 
idea  into  measurable  form.  Such  advantages  are  in  reality  immeasurable  in  figures. 
The  value  of  a  beginning  to  save  is  often  in  itself  the  equivalent  of  a  fortune.  One 
frequently  hears  a  successful  man  attribute  his  success  to  some  incident  that  induced 
him  to  begin  saving. 

The  workingman  who  owns  his  home  has  made  the  conditions  that  are  necessary 
to  free  him  from  the  harassments  of  strikes  and  squabbles  for  increased  wages.  By 
home  study  and  self -improvement  he  can  learn  to  do  better  work  at  higher  pay.  A 
weaver  of  plain  goods  can,  by  learning  to  do  Jacquard  work,  double  his  pay  quicker 
than  he  could  ever  get  10  per  cent,  advance  by  a  strike.  How  much  better  to  make 
substantial  headway  by  peaceful  means  rather  than  make  scant  headway  by  violence 
and  troublesome  means !  The  family  owning  a  house  has  better  opportunity  for 
home  study. 

Besides  the  material,  moral  and  intellectual  advantages  of  home-building  already 
recited,  there  is  an  aesthetic  and  artistic  advantage.  The  workingman  who  owns  his 
home  may  take  pleasure  in  planting  flowers,  in  making  a  pretty  plot  of  grass,  in 
planting  trees  and  shrubs  and  in  otherwise  improving  the  beauty  of  the  home.  Many 
a  child  is  born  to  working  parents  who  has  taste  and  talent  for  art,  music,  painting, 
tapestry  weaving,  etc.  In  the  conditions  that  often  surround  working  people  in 
rented  houses  and  hovels  any  superior  talent  or  taste  of  a  child  or  youth  is  dried 
up  and  lost  to  the  world. 

One  of  the  most  astonishing  things  in  my  experience  with  building  and  loan 
associations  and  with  working  people  is  the  contrasted  conditions  at  Charlotte,  N.  C. 
Part  of  the  working  people  live  in  their  own  homes  and  stand  the  equals,  if  not  the 
superiors,  of  working  people  in  any  other  section.  These  are  the  machinists,  carpen- 
ters, bricklayers  and  workers  at  several  other  trades.  They  send  their  children  to 
school,  attend  church,  and  have  all  the  attributes  of  good  citizenship.  Another  class, 
the  cotton-mill  operatives,  in  many  cases  live  in  company  houses,  move  frequently, 
save4  little  money,  and  give  scant  attention  to  schools.  Many  of  them  are  as  good 
citizens  as  working  people  who  are  in  other  occupations,  but  in  the  main  the  differ- 
ence between  their  condition  and  that  of  the  former  class  of  work  people  is  enough 


22 

to  be  notable.  It  is  equally  notable  that  the  machinists,  carpenters  and  bricklayers 
are  extensive  patrons  of  the  building  and  loan  association,  while  the  cotton-mill  oper- 
atives are  not.  Sometimes  it  is  claimed  that  the  wages  of  the  cotton-mil!  operatives 
are  too  low  to  admit  of  saving,  but  this  is  an  error,  as  the  income  of  the  average 
cotton-mill  family  is  greater  than  that  of  the  average  machinist  or  carpenter.  In 
a  cotton  mill  several  members  of  a  family  can  work,  while  the  carpenter  alone  of 
his  family  is  a  wage-earner. 

A  similar  contrast  exists  in  Pennsylvania.  The  Philadelphia  mechanics  are 
usually  members  of  building  and  loan  associations,  and  live  in  homos  which  they 
own  through  these  institutions.  On  the  other  hand,  the  coal  miners  live  usually  in 
company  houses,  and  are  inclined  to  strikes  and  squabbles. 

No  matter  whether  the  membership  in  the  building  and  loan  association  is  the 
cause  of  the  better  living,  or  whether  the  disposition  to  live  better  is  the  cause  of 
the  membership, the  advantagesof  the  membership  are  apparent.  It  appears  also  that 
a  community  of  working  people  who  are  saving  their  money  and  building  homes  are 
rarely  engaged  in  any  kind  of  controversy  with  their  employers,  and  are  practically 
never  engaged  in  strikes.  The  ownership  of  a  home  by  parents  leads  to  better 
attendance  at  school  by  the  children  and  to  steadier  industry  by  all.  It  is  soon 
learned  that  by  increase  of  knowledge  and  skill  far  better  advance  in  wages  can  be 
gained  than  by  strikes.  It  is  learned  that  education  and  training  are  the  cheapest 
things  in  the  world  to  buy  and  the  highest-priced  things  in  the  world  to  sell. 

Working  people  have  rarely  raised  wages  more  than  10  per  cent,  by  means  of 
strikes.  By  improving  one's  knowledge  and  increasing  one's  skill  wages  may  be 
doubled,  tripled  or  even  stiil  further  increased.  The  first  step  for  a  workingman's 
family  towards  education  and  skill  is  the  saving  of  money  to  buy  a  home.  It  is  in 
and  from  the  permanent  home  that  the  best  education  and  the  best  training  can  be 
acquired.  Philadelphia  has  been  called  a  city  of  workingmen's  homes.  It  is  notable 
that  Philadelphia  has  a  population  of  high-priced  and  contented  working  people. 
They  build  the  ships  and  locomotives,  weave  the  lace  curtains  and  carpets  of  Amer- 
ica, and  do  a  lot  of  other  high-class  work  at  high  wages.  They  commenced  early  to 
save  their  money,  build  homes  and  educate  their  children. 


CHAPTER    V. 

Some  Examples  of  Home  Building. 

The  co-operative  savings  banks  and  building  and  loan  systems  of  Massachusetts. 
Pennsylvania,  Maryland  and  North  Carolina  have  brought  about  the  construction  of 
thousands  upon  thousands  of  working  people's  homes,  which  are  models  of  domestic 
convenience  and  comfort.  In  the  homes  of  the  Pennsylvania  working  people  in  and 
about  Philadelphia,  and  in  the  Lehigh  valley,  not  only  is  every  piece  of  furniture 
and  every  piece  of  equipment  of  the  very  best,  but  the  arrangement  of  them  has  been 
studied  out  to  reduce  the  work  in  the  kitchen  to  a  minimum.  The  stove,  the  kitchen 
table,  the  sink  and  other  appliances  are  so  placed  that  the  work  can  be  done  with  the 
fewest  steps.  The  windows  are  placed  to  give  the  best  light  and  the  best  ventila- 
tion, and  to  give  them  exactly  where  they  are  most  wanted. 

These  perfections  are  the  result  of  much  study  and  suggestion  on  the  part  of  the 
working  people  themselves.  They  become  a  part  of  the  profit  or  advantage  that  the 
building  and  loan  association  brings.  Few  people  care  to  trouble  themselves  to  work 
out  good  ideas  and  economical  arrangements  for  a  landlord.  This  ought  not  to  be 
so,  but  it  is  so. 

In  studying  the  economies  of  house  building  let  no  one  think  he  can  safely  dis- 
pense with  the  services  of  an  architect.  If  a  bricklayer  wants  corpenter  work  done 
he  had  better  hire  a  carpenter  to  do  it  than  attempt  it  himself.  If  a  machinist  wants 
bricklaying  done  he  had  better  get  a  bricklayer  to  do  it.  The  architect  is  trained  in 
making  a  house  cheap  and  beautiful,  as  thi  mechanic  is  in  doing  a  good  job  at  his 
own  trade.  He  can  reduce  expense  at  one  point  and  add  much  to  beauty  at  another. 
and  the  net  cost  of  employing  him  will  be  little  or  nothing. 

Yet,  with  the  opportunity  to  build  houses  for  themselves,  there  is  no  more  fruitful 
source  of  good  ideas  than  the  working  people  themselves.  The  husband  is  usually 
a  mechanic  of  some  kind — machinist,  bricklayer,  carder,  weaver  or  some  other.  He 
can  give  good  ideas  about  constructions.  The  wife  usually  does  her  own  housework, 
and  she  can  give  good  ideas  about  location  of  doors,  windows,  kitchen  equipment,  etc. 

The  writer,  while  working  for  the  Bethlehem  Iron  Co.  in  Pennsylvania,  fre- 
quently had  occasion  to  make  drawings  for  working  people  who  built  homes  through 
the  building  and  loan  association.  The  designs  of  these  houses  were  usually  made  up 
of  ideas  furnished  more  by  the  mechanic  and  his  wife  than  by  the  draftsman. 
Indeed,  the  wife  had  the  most  to  say  about  it,  and  the  mechanic  and  the  draftsman 
generally  did  as  she  said.  By  this  process  of  engaging  the  interest  of  the  mechanic 
in  the  design  a  standard  type  of  workingman's  home  was  soon  developed.  This  is 
a  two-story  brick  building  with  parlor,  dining-room  and  kitchen  on  the  lower  floor, 
and  with  two  or  three  bedrooms  and  a  bathroom  on  the  second  floor.  Block  after 
block  of  these  houses  has  been  built  in  the  Lehigh  valley,  in  Philadelphia  and  in 
Baltimore. 

There  has  been  a  similar  development  of  a  system  of  cottages  in  Charlotte,  N.  C. 
The  owner  is  generally  a  mechanic,  and  his  wife  generally  does  the  housework.  This 
has  naturally  led  to  the  same  degree  of  perfection  and  convenience,  with  an  entirely 
different  method  of  architecture,  more  suitable  to  the  climate,  and  utilizing  the  fact 
that  land  can  be  bought  much  cheaper,  thus  enabling  the  builder  to  get  land  enough 
in  the  front  yard  for  flowers,  and  also  plenty  for  a  vegetable  garden.  These  Char- 
lotte houses  are  mostly  frame  cottages,  and  they  usually  have  lots  containing  from 
a  quarter  to  half  an  acre. 


24 

The  cost  of  workingmen's  houses  varies  in  different  parts  of  the  country.  For 
the  Piedmont  region  of  the  South  Atlantic  States  the  following  estimates  are  typical : 

Two-room  cottage  with  kitchen $250 

Three-room  cottage  with  kitchen 325 

Four-room  cottage  with  kitchen 400 

The  above  are  simple  frame  houses  without  baths,  closet  or  other  "modern  con- 
veniences." They  are  built  mostly  for  and  by  cotton-mill  operatives — carders,  spin- 
ners, weavers  and  dyers — who,  up  to  the  present  time,  have  been  accustomed  to  very, 
very  simple  but  not  economical  methods  of  life.  The  rapid  development  of  cotton 
manufacture  has  brought  them  from  the  farm  to  the  factory. 

For  machinists,  carpenters,  bricklayers  and  other  similar  trades  more  expensive 
houses  are  the  rule.    These  run  about  as  follows  : 

Pour-room  cottage  with  kitchen $600 

Six- room  cottage  with  kitchen 900 

Eight-room  cottage  with  kitchen 1200 

These  with  moderate  interior  finish  and  conveniences. 
For  a  better  line,  the  following : 

Five-room  cottage  with  kitchen $1000 

Seven-room  cottage  with  kitchen 1500 

Nine-room  cottage  with  kitchen 2000 

These  with  nice  finish  and  excellent  modern  improvements. 

Any  of  the  above  houses  can  be  made  to  cost  more  by  the  use  of  hardwoods,  finer 
papers  on  walls  and  more  expensive  plumbing  or  other  better  finish. 

Take  now  the  first  case  of  a  small  and  cheap  cottage.  A  young  man,  who  is  a 
carder's  helper  and  gets  $1.25  a  day,  marries  a  girl  who  is  a  weaver  earning  $1  a 
day.  The  husband  at  $1.25  a  day  makes,  say,  $30  a  month.  He  takes  three  shares 
of  building  and  loan  stock  and  builds  a  cottage  costing  about  $300.  His  payments 
are  as  follows : 

Dues  per  month  of  four  weeks  (13  months  in  a  year) $3  00 

Interest 1  50 

Total  per  month $4  50 

The  dues  and  interest  would  stop  in  about  six  and  one-half  years,  and  the  carder's 
helper,  with  his  wife,  would  own  the  house.  If  he  had  been  renting  a  house  mean- 
while they  would  have  had  to  pay  about  $2.50  a  month  rent.  But  by  saving  this  rent 
money  the  net  cost  of  the  house  is  $2  a  month  for  six  and  one-half  years,  or  about 
$160,  for  a  house  worth  $300.  The  balance  of  the  $300  is  covered  partly  by  the  rent 
money  and  partly  by  his  share  of  the  general  profits  of  the  association. 

The  building  and  loan  association  requires  a  first  mortgage  on  house  and  lot.  In 
the  above  case  the  carder's  helper  who  built  the  home  is  assumed  to  have  had  his  lot 
bought  and  paid  for.  Suppose,  however,  that  he  buys  his  lot  on  long  credit,  giving 
a  second  mortgage  to  secure  the  debt  and  a  first  mortgage  to  the  building  and  loan 
association  for  money  to  build  a  house.  The  lot  in  this  case  for  building  a  very 
simple  and  economical  cottage  ought  not  to  cost  over  $100.  Suppose  the  purchaser 
pays  for  his  house  in  the  first  six  and  one-half  years,  at  the  rate  of  $4.50  a  month 
of  four  weeks  (13  times  a  year),  and  then  subscribes  for  one  share  of  building  and 
loan  stock  in  the  next  series,  $100,  to  pay  for  the  lot.  His  dues  and  interest  on 
this  will  be  $1.50  a  month  for  six  and  one-half  years  more.  A  carder's  helper,  earn- 
ing only  $1.25  a  day,  can  pay  for  a  house  and  lot  in  13  years.  In  the  meantime  all 
the  work  he  has  put  upon  the  place  himself  has  gone  to  improve  it  for  his  benefit. 

It  is  natural  to  suppose  that  the  carder's  helper  would  in  time  get  to  be  a  carder 
and  get  more  pay.  Even  if  he  should  then  want  a  larger  house  he  could  add  to  his 
cottage  or  go  in  for  another  house  and  keep  the  cottage  as  an  investment. 


Take  the  case  of  a  $500  house  : 

Dues  on  five  shares  of  building  and  loan  stock  per  month  (of  four  weeks), 

principal $5  00 

Interest 2  50 

Total  dues  and  interest  per  month $7  50 

Deduct  rent  which  would  have  been  paid  per  month,  say 5  00 

Net  amount  paid  for  ownership  of  house  per  month $2  50 

This  amount  paid  for  about  841/.  times,  making  the  total  net  cost  of  a  $500 
house  $211.25. 

I  know  of  a  case  iu  a  prosperous  and  growing  manufacturing  town  where  a 
young  man  had  a  lot  bought  and  paid  for.  He  took  20  shares  in  the  building  and 
loan  association,  borrowed  $2000,  and  built  a  house,  intending  to  live  in  it..    About 


A  $1500  HOUSE  ;    TAID  FOR   IN  6%  YEARS.      DUES    PER    MONTH 
$7.50;    TOTAL   $22.50.      LOT    NOT    INCLUDED. 


$15 ;     INTEREST 


the  time  the  house  was  finished  he  got  an  attractive  offer  in  another  city,  which  he 
accepted.    This  brought  him  to  regard  his  house  investment  as  a  sort  of  handicap. 

His  dues  were,  per  month $20 

Interest 10 

Total $30 

He  actually  rented  the  house  for  $32  a  month  through  the  whole  six  and  one-half 
years.  At  the  end  of  that  time  the  building  and  loan  association  cancelled  the  debt. 
In  other  words,  the  tenant  actually  paid  for  the  house  and  paid  for  six  and  one-half 
years  $2  a  month  over  and  above  the  cost  of  the  house.  Such  a  case  only  happens 
in  a  prosperous  and  growing  community,  where  rents  are  high  and  houses  scarce, 
and  yet  it  does  happen  not  at  all  infrequently.  I  know  of  a  number  of  other  cases- 
similar  to  this. 


20 

Take  the  case  of  a  machinist  working  at  $2.50  a  day.  Some  earn  more,  some  less. 
At  26  working  days  in  a  month,  the  pay  per  month  would  be  $65.  A  $1200  house 
would  require  monthly  payments  as  follows : 

Dues  on  12  shares $12 

Interest  on  12  shares 6 

'  Total  per  month $1S 

Deduct  rent  formerly  paid,  say 12 

Net  monthly  payment  to  buy  house $6 

This  for  six  and  one-half  years  (13  months  in  a  year)  makes  a  total  of  $507,  the 
actual  cost  of  a  $1200  house. 

In  Philadelphia,  where  there  is  an  older  development  than  in  the  Piedmont 
region  of  North  Carolina,  houses  are  usually  brick,  instead  of  frame,  and  they  there- 
fore cost  more.     The  range  would  be  about  as  follows : 

Six-room  house  and  kitchen $1500 

Nine-room  house  and  kitchen 2000 

Eleven-room  house  and  kitchen 2750 

Sometimes  the  building  and  loan  associations  in  Philadelphia  have  shares  of  $200 
par  value,  requiring  10  years  to  mature.  In  these  cases  the  monthly  interest  is  equal 
to  the  monthly  dues.     Thus  : 

Dues  on  10  shares  are,  per  month  of  four  weeks  (13  months  in  a  year) $10 

Interest 10 

Total  per  month  for  10  years $20 

Thus  in  one  of  these  associations  a  person  may  borrow  on  10  shares  $2000,  and 
pay  $20  a  month  for  10  years  to  cancel  the  debt. 

Some  prefer  the  10-year  plan,  with  shares  at  $200  each,  but  most  people  prefer 
the  six-and-one-half-year  plan,  with  shares  at  $100  each.  Either  plan  is  all  right, 
and  is  generally  satisfactory.  The  longer  the  term,  the  easier  the  payments  are,  and 
conversely,  the  greater  the  monthly  instalments,  the  shorter  the  time  to  finish. 

There  is  practically  no  limit  to  the  size  and  cost  of  houses  that  may  be  built.  A 
merchant  may  take  100  shares  at  $100  each,  and  on  this  basis  borrow  money  to  build 
a  $10,000  house  or  store.  I  have  known  houses  worth  $25,000  to  be  built  through 
the  building  and  loan  association  on  the  instalment  plan,  for  business  purposes, 
when  the  money  could  not  have  been  raised  in  any  other  way  with  any  assurance  of 
easy  repayment. 

A  merchant  wishing  to  build  a  house  at  a  cost  of  $10,000  would  have  payments 
as  follows  : 

Dues  per  month  of  four  weeks  (13  months  in  a  year) $100 

Interest  per  month 50 

Total  per  month   (for  84%  months) $150 

Subtracting  former  rent  from  this,  the  total  net  cost  would  be  a  very  small  sum 
for  a  fine  piece  of  property  if  well  located. 

A  merchant  wishing  to  build  a  store  to  cost  $20,000  would  have  the  following 
payments  to  make  : 

Dues  per  month  of  four  weeks  (13  months  in  a  year) $200 

Interest  per  month 100 

Total  per  month   (for  84y2  months ) $300 

Deduct  from  this  the  former  rent,  and  the  total  net  sum  again  becomes  small  for 
a  very  important  property. 


CHAPTER    VI. 

Philanthropy  and  Working  People. 

This  system  of  the  co-operative  savings  bank  and  the  building  and  loan  associa- 
tion gives  a  solution  of  the  problem  of  working  people's  homes  that  is  most  essen- 
tially a  peaceful  advancement.  It  is  a  plan  by  which  working  people  themselves 
solve  the  problems  of  betterment  for  themselves.  There  is  nothing  philanthropic 
about  it.  It  is  business,  pure  and  simple,  and  nothing  but  business.  The  man  or 
woman  who  joins  a  building  and  loan  association  and  builds  a  house  sacrifices  noth- 
ing of  self-respect  and  nothing  of  dignity.  Indeed,  self-respect  and  dignity  are 
increased.  The  mechanic  who  builds  a  house,  sends  his  children  to  school,  attends 
church  and  otherwise  identifies  himself  with  a  community  of  good  people  is  im- 
mensely advantaged  over  the  one  who  comes  today  and  may  go  tomorrow.  He  be- 
comes a  citizen,  a  neighbor  and  a  friend,  where  before,  even  though  a  good  mechanic, 
and  well  thought  of,  he  had  no  particular  standing  in  any  community.  His  better 
situation  makes  better  opportunities  for  his  children.  If  there  is  a  young  daughter 
with  musical  taste  and  talent,  people  take  more  interest  in  her  than  if  she  might  go 
tomorrow.  Identification  with  a  community  and  its  people  always  makes  a  better 
condition  for  any  family.  The  home  and  the  binding  of  the  family  to  the  commu- 
nity are  largely  the  basis  of  Anglo-Saxon  strength  and  Anglo-Saxon  civilization. 

There  is  no  help  for  working  people  that  compares  with  the  help  they  provide  for 
themselves.  Munificent  philanthropy  is  as  nothing  compared  with  a  morsel  of  self- 
help.  The  one  may  be  fruitless,  or  even  injurious ;  the  other  is  always  strengthening 
and  fruitful. 

Philanthropy  is  not  so  easy  as  it  appears  on  the  surface.  Even  with  plenty  of 
money  there  are  few  people  who  can  do  true  philanthropic  work.  With  most  people 
the  idea  of  philanthropy  is  to  make  other  people,  and  especially  work  people,  do  as  the 
would-be  philanthropist  thinks  they  ought  to  do.  This  is  naturally  fruitless  and 
offensive. 

With  many  other  people  egotism  is  made  to  simulate  philanthropy.  In  many 
churches  the  sense  of  pride  leads  to  the  appointment  of  committees  to  look  after 
working  people.  These  committees,  in  turn,  go  out  among  working  people  in  pride 
and  conceit,  and,  of  course,  do  no  good. 

It  is  far  from  my  intention  to  charge  these  ignoble  motives  upon  well-disposed 
people  and  churches  or  philanthropic  societies,  or  to  depreciate  their  many  and  vast 
good  works.  But  the  best  philanthropy  is  that  which  places  opportunity  within  the 
reach  of  humanity  and  keeps  the  personality  of  the  philanthropist  wholly  in  the  back- 
ground. Much  of  the  best  work  in  this  line  has  been  done  by  people  who  had  no 
money  to  give.  The  men  who  devised  and  pressed  to  practical  operation  the  scheme 
of  the  German  land  loan  bank  system  did  not  give  a  cent.  Yet  by  means  of  this 
system,  and  by  patient  encouragement  to  follow  it,  the  condition  of  the  German 
farmers  has  been  wonderfully  improved,  and  their  banks  now  lend  money  to  the  city 
banks,  instead  of  borrowing  from  them.  No  money  has  ever  been  spent  in  the  name 
of  philanthropy  to  establish  or  foster  a  building  and  loan  association  in  America. 
Yet  with  the  plan  plainly  laid  out,  and  with  laws  that  tolerate  rather  than  foster 
them,  tbey  have  been  perhaps  the  most  important  factor  among  civilizing  influences 


2S 

in  raising  vast  numbers  of  working  people  into  the  position  of  home-owners,  and  in 
many  cases  have  been  the  means  of  launching  a  career  which  has  culminated  in  high 
position  and  wealth. 

People  are  constantly  being  heard  to  say  what  they  could  and  would  do  if  they 
had  Mr.  So  and  So's  money.  This  is  simply  the  lame  excuse  with  which  the  laggard 
deludes  himself  and  tries  to  delude  others.  As  a  matter  of  fact,  nothing  is  more 
astonishing  than  the  actual  results  when  ample  money  is  put  into  the  hands  of  such 
people.  Indeed,  the  results  are  usually  just  the  same  as  they  formerly  were  with  the 
same  individual  when  he  had  no  money.  In  such  cases  the  giving  of  money  is  simply 
foolishness.  The  thing  needed  is  to  put  at  the  command  of  the  individual  some  fair, 
open  opportunity,  and  then  stimulate  him  to  embrace  it  and  hold  to  his  purpose. 

I  have  known  this  experiment  to  be  tried  over  and  over  again.  A  tenant  was 
asked   by   the   landlord   to  improve   the   grounds  about   the   house.      Invariably   the 


$800  COTTAGE 


PAID  FOR  IN  6V2  YEARS.     DUES   PER   MONTH 
TOTAL   $12.      LOT    NOT    INCLUDED. 


INTEREST   $4; 


answer  was  that  nothing  would  be  more  easy  or  agreeable  if  the  family  could  spare 
the  money.  The  landlord  offered  to  pay  bills  for  necessary  outlay.  But  there  was 
no  perceptible  change  in  appearance,  even  though  comparatively  liberal  sums  were 
paid  for  expense  of  effort.  The  truth  is  that  for  a  tenant  or  home-owner  the  money 
required  to  keep  premises  neat  and  attractive  is  so  insignificant  that  it  need  not  be 
considered.  The  desire  for  better  appearance  must  first  be  acquired,  and  then  the 
result  comes  without  the  need  of  much  money. 

Working  people  have  far  more  resource  and  ability  to  pay  their  own  way,  and 
to  pay  for  what  they  get,  than  is  generally  supposed.  Indeed,  most  of  them  pay 
extravagantly  for  what  they  get.  In  many  cases  they  pay  enough  rent  for  a  cheap 
and  uncomfortable  house  to  pay  in  a  very  few  years  for  a  good  comfortable  house 
and  own  it  in  fee-simple.     It  is  the  opportunity  to  do  this  latter  thing,  rather  than 


29 

financial  help,  that  they  need,  even  if  the  help  is  called  philanthropic  or  semiphilan- 
thropic.  The  greatest  mistake  of  the  philanthropist  is  usually  judging  others  by  his 
own  tastes  or  ideas.  He  too  frequently  fails  to  give  either  support  or  sympathy  to 
what  the  workingman  wants  to  do,  but  he  insists  that  the  workingman  shall  do  as 
the  philanthropist  wants  him  to  do. 

It  is  surprising  to  note  how  many  people  there  are  interested  in  helping  to  im- 
prove the  condition  of  working  people,  when  in  fact  they  are  interested  in  exploiting 
themselves  or  some  of  their  purely  theoretic  ideas.  Assign  to  one  of  these  a  quiet, 
modest  duty  which  requires  no  personal  prominence,  and  his  interest  lags  at  once. 
Many  are  simply  tender-hearted,  and  sometimes  work  themselves  into  an  excess  of 
sympathy  for  imaginary  hardships  of  others.  Many  situations  which  are  hardships 
to  some  people  are  actually  enjoyed  by  others.  I  recall  the  instance  of  an  affection- 
ate mother  who  would  sometimes  worry  herself  into  sickness  about  stories  she  heard 
of  her  son  who  was  visiting  in  the  country.  This  boy  would  go  'possum-hunting 
with  negroes ;  the  party  would  sometimes  build  a  fire  in  the  woods  and  lie  down  by 
it,  along  with  the  dogs  that  would  be  sure  to  join  the  sleeping  party,  all  simply  to 
await  an  hour  when  it  was  thought  the  'possums  would  walk  more  freely  in  the  night. 
This  all  sounded  very  rough  and  pitiable  to  the  mother,  and  she  thought  the  negroes 
ought  to  be  reproved  for  subjecting  so  nice  a  boy  to  such  treatment.  The  boy  him- 
self, however,  regarded  the  whole  proceeding  as  very  excellent  sport — something 
unusually  choice  in  the  way  of  an  enjoyable  time  for  a  boy,  and  his  impatience  at 
his  mother's  fervent  sympathies  brought  him  almost  to  intolerable  rudeness.  He 
suggested  that  she  quit  making  herself  a  nuisance  about  his  very  enjoyable  hunting 
parties. 

The  only  person  who  can  gauge  the  workingman's  tastes  and  requirements  is  the 
workingman  himself.  With  a  fair  opportunity  he  will  do  more  for  himself  than  can 
possible  be  done  for  him  by  contributions  of  money  or  by  statements  of  what  he 
ought  to  do  by  some  one  who  has  no  appreciation  of  his  point  of  view. 

In  education  it  is  more  or  less  the  same  way.  There  are  many  institutions  that 
are  endowed  by  States  and  individuals,  and  many  institutions  where  a  college  course 
may  be  obtained  almost  free,  but  whenever  a  person  having  only  a  common  school 
education  wants  to  supplement  that  education  in  some  way  that  will  qualify  him  to 
make  a  living,  it  is  left  for  the  commercial  college  to  accomplish  this  at  full  pay  and 
a  profit  besides.  These  are  the  only  schools  where  a  young  man  or  a  young  woman 
may  go  for  a  few  weeks  or  a  few  months  and  learn  to  do  some  one  thing  so  well  that 
lie  can  make  a  living  by  it.  Without  endowment,  and  usually  with  scant  capital, 
these  commercial  colleges  are  doing  work  that  yields  a  very  high  percentage  of  suc- 
cess for  themselves  and  the  youth  of  the  country.  The  popularity  of  country  youth 
in  employment  in  cities  is  due  to  the  fact  that  they  are  usually  willing  to  help  them- 
selves and  know  how.  The  extent  to  which  they  have  been  left  to  depend  upon  their 
own  resources  has  made  them  self-reliant.  It  is  really  this  self-reliance,  together 
with  their  physical  development,  which  constitutes  their  best  value. 

At  all  times  and  in  all  countries  the  happiness  and  prosperity  of  the  people  have 
depended  upon  the  security  of  the  farmer  and  mechanic  in  the  pursuit  of  labor  and 
the  enjoyment  of  its  fruits.  When  the  laws  and  systems  of  industry  conduce  to 
keeping  the  farmer  and  mechanic  poor,  they  naturally  become  indifferent  about 
results  one  year  after  another.  Ultimately  they  seem  to  become  utterly  lacking  in 
those  better  qualities  which  under  more  favorable  conditions  would  develop  to  a  high 
degree. 


30 

In  the  latter  part  of  the  eighteenth  century  and  the  early  part  of  the  nineteenth 
there  was  a  well-developed  and  extensive  manufacturing  interest  in  the  South. 
White  mechanics  were  numerous,  and  lived  well.  The  growth  of  the  institution  of 
slavery  had  nearly  destroyed  all  manufactures  in  the  South  by  the  middle  of  the 
nineteenth  century.  The  white  mechanics  had  been  to  a  large  extent  driven  to  emi- 
grate or  forced  into  that  poverty  that  brought  upon  them  the  reproachful  name 
"poor  white  trash." 

After  the  abolition  of  slavery,  and  after  a  period  of  disastrous  experiment  in 
trying  to  legislate  on  social  and  political  conditions  "without  regard  to  race,  color 
or  previous  condition  of  servitude."  education,  intelligence  or  moral  character — in- 
deed, without  regard  to  any  of  the  faults  or  virtues  of  humanity — manufactures  were 


A    $400   COTTAGE 


PAID   FOR    IN  6y2   YEARS.     DUES  PER  MONTH  $4  ;    INTEREST 
$2  :    TOTAL.  $6.      LOT    NOT    INCLUDED. 


quickly  re-established  in  the  South,  and  the  descendants  of  the  mechanics  of  former 
days  ceased  at  once  to  be  "poor  white  trash"  and  became  with  marvelous  quickness 
as  good  carpenters,  machinists,  carders,  weavers,  etc.,  as  their  ancestors  were. 

As  long  as  the  South  was  destroying  the  opportunity  of  her  mechanics  they  be- 
came poorer  and  weaker.  This  caused  her  to  lose  in  the  Civil  War.  As  soon  as  she 
changed  her  system  and  gave  the  workingman  a  chance  she  commenced  to  prosper 
again,  and  she  is  rapidly  becoming  both  rich  and  strong.  It  is  always  so.  Oppress 
and  impoverish  the  working  people,  and  the  nation  becomes  weak  and  poor.  Put 
opportunity  within  their  reach,  and  the  nation  becomes  strong  and  rich. 


3J 

England  has  always  been  very  careful  of  tbe  treatment  of  her  working  people, 
and  very  solicitous  to  keep  open  to  them  opportunities  for  good  living  and  independ- 
ence. It  was  in  England  the  building  and  loan  association  first  started  and  pros- 
pered. Parliament  has  always  been  most  liberal  in  making  laws  that  created  or 
fostered  better  opportunities  for  the  working  people  and  safeguarded  their  interest. 
Many  who  study  these  questions  attribute  to  this  the  great  success  and  strength  of 
that  nation. 

Laws  and  conditions  that  place  opportunity  within  the  reach  of  the  workingman 
himself,  and  for  himself,  do  more  good  for  his  advancement  than  all  actual  contribu- 
tions in  money  or  advice  that  could  possibly  be  made.  All  humanity  can  be  brought 
to  lose  courage  and  heart  by  being  given  no  chance.  There  are  so  many  ways  by 
which  working  people  are  cheated  out  of  or  otherwise  deprived  of  savings  that  many 
a  one  is  brought  to  feel  that  he  had  rather  squander  his  surplus  earnings  than  put 
them  where  he  might  likely  lose  them  for  the  advantage  of  somebody  else.  With  a 
knowledge  that  what  is  saved  is  safe  for  himself  the  workingman  becomes  a  great 
capitalist,  as  is  evidenced  by  the  aggregate  capital  in  the  co-operative  banks  of  Mas- 
sachusetts and  the  building  and  loan  associations  of  Pennsylvania,  Maryland  and 
North  Carolina,  and  the  farmers'  land  loan  banks  of  Germany. 

It  is  rare  that  a  working-man  needs  charity  or  any  kind  of  free  help.  Make  for 
him  a  fair  opportunity  and  good  security  for  his  savings,  show  him  the  opportuni- 
ties, convince  him  that  they  are  safe,  then  give  him  friendly  encouragement,  and  the 
chances  are  he  will  succeed.  But  to  do  so  he  must  be  left  perfect  freedom  to  under- 
take something  according  to  his  own  tastes,  and  not  be  pressed  into  doing  something 
that  somebody  else  thinks  he  ought  to  do.  Good  advice  is  all  right,  but  it  is  all 
wrong  to  press  on  the  workingman  methods  of  spending  his  earnings  and  savings 
that  are  contrary  to  his  tastes  and  what  he  considers  his  requirements. 

Good  philanthropy  for  the  workingman  is,  more  than  all  else,  opportunity  and 
freedom. 


CHAPTER    VII. 

State  Laivs,  Charters,  By-Laws  and  Reports. 

Every  State  should  have  a  special  law  relating  to  building  and  loan  associations. 
These  laws  should  be  in  some  respects  similar  to  the  laws  relating  to  savings  banks. 
Provision  should  be  made  for  the  inspection  of  the  accounts  of  building  and  loan 
associations  and  their  publication  similar  to  those  provided  for  savings  and  other 
State  banks.  It  should  be  provided  that  the  form  of  title  "Building  and  Loan  Asso- 
ciation" should  be  exclusively  used  by  associations  which  are  purely  mutual.  Any 
corporation  undertaking  to  do  a  savings  business  not  wholly  on  the  mutual  plan 
should  be  required  to  be  known  as  a  bank,  and  not  as  a  building  and  loan  associa- 
tion. The  law  should  require  the  associations  to  pay  the  cost  of  inspecting  their 
books  and  of  publishing  their  statements,  but  should  not  require  any  other  tax.  This 
is  not  because  the  building  and  loan  association  should  be  exempted  from  paying 
taxes  upon  any  assets  it  owns  not  otherwise  taxed,  but  because  the  building  and  loan 
association  in  reality  never  owns  any  property  except  in  the  event  of  having  to  fore- 
close a  mortgage  on  a  house.  In  such  a  case,  of  course,  taxes  would  be  put  upon  the 
real  estate.  The  association  as  ordinarily  operated,  however,  simply  acts  as  an  agent 
for  the  members,  receiving  the  instalments  from  each  of  them,  and  turns  the  aggre- 
gate over  to  one  member  to  build  a  house  or  for  other  purposes.  Therefore,  as 
quickly  as  the  money  is  paid  in  by  the  various  members,  it  is  promptly  paid  out  on 
a  loan  and  goes  into  real  estate  or  some  other  property  which  is  taxable.  The  asso- 
ciation is  simply  a  legal  entity.  It  is  an  instrumentality  by  means  of  which  a  great 
number  of  persons  may  pay  in  small  sums  and  have  the  aggregate  paid  out  to  indi- 
vidual members  in  succession  until  each  member  shall  have  received  the  par  value 
for  his  shares.  The  building  and  loan  association  in  reality  charges  no  interest.  The 
word  interest  is  used  very  much  as  the  word  current  is  used  in  connection  with  elec- 
tricity. When  any  one  member  gets  the  amount  of  his  shares  at  par  before  he  has 
finished  the  payments  and  before  a  number  of  other  members  have  received  their  set- 
tlements, the  member  receiving  his  money  in  advance  is  required  to  pay  an  additional 
instalment  to  equalize  his  use  of  the  money  in  advance  of  that  received  by  others. 
It  is  generally  called  interest,  but  it  is  not  interest,  because  it  does  not  diminish  with 
«ach  instalment  payment,  but  is  fixed  at  a  sum  or  percentage  that  equalizes  the  use 
of  the  money  by  those  who  have  received  it  with  those  who  have  not  received  it. 

It  is  very  important  in  the  interest  of  safety  that  the  law  of  every  State  require 
foreign  or  interstate  associations  to  make  a  deposit  with  the  State  treasurer  for  the 
security  of  stockholders,  the  same  as  is  now  required  by  insurance  companies  for  the 
safety  of  policy-holders.  The  greatest  injury  to  the  building  and  loan  association 
business  has  been  that  done  in  the  State  by  corporations  calling  themselves  building 
and  loan  associations,  but  which  in  reality  were  corporations  operated  for  personal 
profit.  Sometimes  it  is  provided  that  the  profit  may  be  legitimately  made,  but  in 
many  cases  the  non-local  institutions,  commonly  called  State  or  interstate  associa- 
tions, have  every  semblance  of  being  properly  organized,  and  the  personal  profit  is 
made  by  their  misconduct.  It  would  probably  be  just  as  well  if  the  restrictions  upon 
*o-called  interstate  associations  were  made  sufficient  to  prohibit  their  operation. 
The  reputation  of  the  home  or  local  institutions  should  not  be  hazarded  by  permit- 


ting  the  operation  of  corporations  from  other  States,  except  under  severe  restrictions 
for  procuring  the  safety  of  the  money  and  the  safe  conduct  of  the  business. 

It  should  be  provided  that  the  par  value  of  the  shares  shall  be  $100,  and  that  the 
instalment  payment  shall  be  25  cents  per  week,  or  $1  per  month. 

The  by-laws  should  in  all  cases  provide  that  loans  shall  be  made  only  upon  real 
estate  upon  first  mortgage.  The  amount  allowed  to  be  loaned  should  be  no  more 
than  the  net  value  of  the  house,  leaving  the  lot  as  a  margin.  Three-quarters  the 
value  of  the  entire  property  might  be  a  good  rule. 

Loans  should  also  be  made  on  the  stock  of  the  association.  Ninety  per  cent,  of 
what  had  been  paid  in  at  any  time  would  be  a  fair  loan  on  the  stock  of  the  asso- 
ciation. 

Loans  should  always  be  made  in  the  order  in  which  they  are  applied  for.  The 
income  of  the  association  is  generally  very  accurately  known,  and  when  the  loans 


$2500  DWELLING;   PAID  FOR   IN  6%  YEARS.     DUES   PER   MONTH   $25;   INTEREST 
$12.50;  TOTAL  $37.50.     LOT  NOT  INCLUDED. 


are  made  in  the  order  of  application  the  secretary  and  treasurer  can  estimate  very 
accurately  about  when  any  one  applicant  would  get  his  money.  Formerly  loans 
were  made  by  putting  the  money  up  for  sale  on  a  discount  basis ;  whoever  offered  to 
suffer  the  biggest  discount  on  the  amount  asked  for  would  get  a  loan.  In  the  past 
some  associations  have  fixed  an  even  discount.  These  premium  discounts  or  regular 
discounts  are  all  wrong.  Each  borrower  should  be  loaned  the  full  amount  on  his 
stock  at  par,  without  deducting  premiums,  discounts  or  other  diminutions.  The  pro- 
vision should  be  for  the  utmost  simplicity — nothing  but  the  payment  of  weekly  or 
monthly  dues,  the  loaning  of  the  money  to  the  full  par  value  of  the  shares  and  the 
fixing  of  an  interest  rate,  or  an  additional  instalment  standing  for  an  interest,  and  a 
vary  moderate  fine,  say  five  cents  per  share  for  failure  of  prompt  payment.     Some- 


34 

times  associations  make  their  par  value  $200.     This  simply  requires  longer  for  a 
series  to  run  out,  and  is  of  no  particular  advantage. 

Below  there  is  submitted  some  statements  of  building  and  loan  associations  oper- 
ating in  the  current  way  of  starting  a  new  series  once. each  six  months,  of  having 


$600  COTTAGE  ;   PAID  FOR   IN  6%  YEARS.     DUES   PER  MONTH 

TOTAL  $9.     LOT   NOT   INCLUDED. 


;   INTEREST  $3; 


shares  at  the  par  value  of  $100,  charging  an  interest  rate  of  fi  per  cent,  and  requiring 
about  six  and  one-third  years  to  run  a  series  to  maturity  with  payments  at  25  cents 
a  week  : 


THE      MECHANICS'      PERPETUAL     BUILDING     AND     LOAN     ASSOCIATION      OF 

CHARLOTTE,    N.    C. 


R.  E.  Cochrane,  Sec- 


Officers:     S.  Wittkowsky,  President;    R.  II.  Jordan,  Vice-President 
retary  and  Treasurer  ;    C.  H.  Duls,  Attorney. 

Directors:  S.  Wittkowskv.  R.  H.  Jordan,  A.  E.  McCansland.  J.  H.  Wearn,  A.  C.  Summer- 
ville,  C.  Valaer,  H.  G.  Link,  Dr.  R.  L.  Gibbon,  YV.  W.  Phlfer.  A.  L.  Smith,  R.  F.  Stokes, 
R.  E.   Cochrane. 


Trial  Balance,  February  29.  1904. 


Assets: 


Loans $547,930  00 

Interest  on  matured  stock 546  27 

Discount  on  advance  payments...  1,513  75 

Expenses 1,170  5S 

Taxes 1,423  97 

Profits  paid  on  withdrawals 495  00 

Withdrawals 14,243  00 


Forfeitures. 

Matured  stock 

Office  furniture 

Insurance  premiums. 

Cash  in  office 

Dues  unpaid 

Interest  unpaid 

Fines  unpaid 


15  00 

39,803  00 

1,065  92 

50  63 

3  02 

3,555  50 

456  48 

480  00 


Liabilities: 

Capital  stock $!34.S4S  47 

Instalments S2.S32  00 

Interest 14,460  38 

Fines 358  75 

Transfer  fees 8  50 

Release  fees 70  00 

Membership  fees 426  25 

Loans  repaid 36,420  00 

Loans  discharged  by  matured  stock  13,200  00 

Matured  stock 21,346  25 

Bills  payable 4,274  54 

Forfeited  stock 15  00 

Dues  unpaid 3,555  50 

Interest  unpaid 456  4S 

Fines  unpaid 480  00 


Total  assets $612,752  12 


Total  liabilities $612,752  12 


42d   Semiannual  Report  for  Six  Months  Ending  February  29,  1904. 


Assets: 

Liabilities: 

Number 

Profit 

Value  of  each 

Number 

Number 

of  years 

Amount  paid 

per  share  W 

ithdrawal  share,  inchid- 

Value  of 

of  sei'ies. 

of  shares. 

in  force. 

per  share. 

on  books. 

profit.         ing  profits. 

each  series 

31 

462 

6 

$78  25 

$14  69 

$13  00               $92  94 

$42,938  2S 

32 

541 

5% 

71  75 

12  37 

10  00                 84  12 

45.508  92 

33 

622 

5 

65  25 

10  21 

8  00                75  46 

46,936  12 

34 

733 

4y2 

58  75  . 

8  27 

6  00                67  02 

49.125  66 

35 

1,074 

4 

52  25 

6  54 

4  00                58  79 

63,140  46 

36 

73S 

3% 

45  75 

5  01 

2  50                50  76 

37,460  88 

37 

1.177 

3 

39  25 

3  6S 

1  50                42  93 

50.52S  61 

38 

1,024 

2y2 

32  50 

2  54 

1  00                35  04 

35,SS0  96 

39 

1,194 

2 

26  25 

1  64 

50                27  89 

33.300  66 

40 

1,147 

1% 

19  50 

91 

20  41 

23,410  27 

41 

2,03S 

i 

13  on 

40 

13  40 

27,309  20 

42 

1.610 

% 

6  50 

10 

6  60 

10,626  00 

43 


12,360 
1,396 


Advance  payments, 


$466,166  02 
13,742  25 


Total.   13.756 

Loans  at  beginning  42d  term $444,590  00 

Loans  this  term 103.340  00 

Total  loans $547,930  00 

deductions  : 

Loans  repaid $36,420  00 

Loans  discharged  bv  ma- 
tured stock, 30th  series.    13.200  00 

49.620  00 

Present  balance  loans $498,310  00 

Discount  on  advance  payments...  1.513  75 

Office  furniture 1,065  92 

Insurance  premiums  paid 50  63 

Cash  in  office 3  02 

Dues  unpaid 3,555  50 

Interest  unpaid 456  48 

Fines  unpaid 480  00 


$479,908  27 

Dues  at  beginning  42d  term $393,1S5  25 

Dues  this  term 82,832  00 


Total  dues $476,017  25 

Deductions  : 

Dues  withdrawn $14,243  00 

Dues  forfeited 15  00 

Dues  to  matured  stock, 

30th  series 33,034  00 

Dues  overpaid,  30th  series  3  00 


47,295  00 


Net  dues  to  stock  account... 
Dues  unpaid 


$42S,722  25 
3,555  50 


Total  dues  paid  and  unpaid..  $432,277  75 
Profits  at  beginning  42d 

term $41,663  22 

Interest     this 

term $14,460  3S 

Less  interest  on 

matured  st'k.         546  27 


Fines  

Transfer  fees 

Release  fees 

Membership  fees. 
Trofit  and  loss. . 


13,914  11 

35S  75 

S  50 

70  00 

426  25 

15  00 

Total  profits $56,455  83 

Deductions  : 

Expenses  $1,170  5S 

Taxes  1,423  97 

Profits    paid    on 
withdrawals...     495  00 

Profits     to     ma- 
tured st'k,  30th 

series 6,766  00 

9.S55  55 


Profits  to  stock  account.  $46,600  28 

Interest  unpaid 456  48 

Fines  unpaid 480  00 


47,536  76 


Total  assets $505,435  30 


Total  dues  and  profits $479,814  51 

Matured  stock 21,346  25 

Bills  payable 4,274  54 


Total  liabilities $G05,435  30 


.       36 

Tabulated  Statement  of  Each  Seeies. 

Memo.  We,  the  undersigned  committee  appointed 

Shares  since  organization 34,455  b.y  the  Mechanics'  Perpetual  Building  and 

Shares  "March  1  1903                                  10  414  Loan   Association,   herehy   certify   that  we 

Shares  "sold   during 'the"  year 'ending  ha.v.,e    examined   the   hooks   and    records    of 

March  1   1904                                                 4  05°  sal<^    association    and    found    them    correct 

Shares  withdrawn'  during  the  'year.'.' '. '.      '645  and  in  good  shape     We  find  that  the  asso- 

Shares  in  force  March  1,  1904 12,963  nation  holds  605  deeds  of  trust,  amounting 

Shares  sold  since  March  1.  1904 1,396  to  $498,310. 

Loans  made  to  March  1.  1903 1,841  A.   T.   STJMMBY, 

Loans  made   during  the  year  ending  March  15,  1904.           F.  J.  HAYWOOD,  Je., 

March  1,  1904 236  A.  M.  MCDONALD. 

End  of  23d  Year. 

SEMIANNUAL  REPORT   OP   THE   MUTUAL   BUILDING  AND   LOAN   ASSOCIATION 
OF  CHARLOTTE,   N.   C,  MARCH  31,  1904. 

Officers:  P.  M.  Brown,  President;  F.  W.  Ahrens,  Vice-President;  A.  G.  Brenizer,  Secre- 
tary and  Treasurer. 

Directors:  P.  M.  Brown,  Dr.  D.  O'Donoghue.  J.  G.  Shannonhouse,  R.  L.  Gray,  John  R. 
Pharr,  W.  F.  Dowd,  John  B.  McLaughlin.  Jr.,  George  B.  Hanna,  A.  G.  Brenizer,  F.  D. 
Lethco,  F.  W.  Ahrens,  H.  A.  Klueppeltoerg. 

Face  of  Ledgee. 

Loans  on  mortgages $214,175  00        Capital  stock $168,574  20 

Office    furniture 26147       Instalments  33,313  25 

Due  by  members 4,217  77        Dues  paid  in  advance 14,324  55 

Expenses  647  50       Dues  39th  class  prepaid 1,032  00 

Prepaid  stock 1,469  94       Bills  payable 2,900  00 

Profit  and  loss 992  00       Entrance  fees 180  80 

Cash  on  hand 5.32194       Fines  25197 

Interest 6,568  85 


$227,0S5  62 
Gains  and  Losses. 


Entrance  Fees. 

Fines 

Interest 


Less  : 

Expenses 

Trofit  and  loss. 


Net  profits  during  the  past  six  months. 


$227,085  62 

$180  80 

251  97 

6,56S  85 

$7,001  62 
1.639  50 

$647  50 
992  00 

$5,362  12 

Assets  and  Liabilities. 

Assets: 

Loans  on  mortgages $214,175  00 

Cash  on  hand 5,321  94 

Due  bv  members 4,217  77 

O  ffi c e  'f  u  r n  i  t u  r e 26147 

Discount  prepaid  stock 1.469  94 

$225,446  12 

Liabilities: 

Bills  payable $2,900  00 

Dues  paid  in  advance 15.356  55 

1S.256  55 


Net  capital  stock  at  present  date $207,1S9  57 


Composed  as  follows: 

21S  shares  twenty-seventh  class,  value  per  share $78  25 

Profit.    15  32 

$93  57    $20,398  26 

257  shares  twentv-eighth  class,  value  per  share $71  75 

Profit,    12  S3 

S4  5S      21,737  06 

250  shares  twenty-ninth  class,  value  per  share $65  25 

rrofit,    10  49 

75  74     18,935  00 

2S3  shares  thirtieth  class,  value  per  share $58  75 

Profit,      S  40 

67  15      19.003  45 


708  shares  thirty-first  class,  value  per  share $52  25 

Profit,      6  52 

5S  77      41,800  16 

2ftt  shares  thirty-second  class,  value  per  share $45  75 

Profit,      4  07 

5q  72      13  237  02 

383  shares  thirty-third  class,  value  per  share $30  00 

Profit,      3  60 

42  60      16,315  80 

488  shares  thirty-fourth  class,  value  per  share $32  50 

Profit,      2  50 

35  01      17,0S0  00 

490  shares  thirty-fifth  class,  value  per  share $26  00 

Profit,      1  58 

27  58      13,514  20 

657  shares  thirty-sixth  class,   value  per  share $19  50 

Profit,         90 

20  40      13,402  80 

563  shares  thirty-seventh  class,  value  per  share $13  00 

Trofit,         40 

■    13  40       7,544  20 

620  shares  thirty-eighth  class,  value  per  share $6  50 

Profit,         10 

6  60        4,092  00 

5, 178  $206,869  85 

Balance   undivided 319  72 

Net  capital  as  above $207,189  57 

We,  the  undersigned  committee  appointed  by  the  board  of  directors  of  the  Mutual 
Building  and  Loan  Association  of  Charlotte,  N.  C,  to  examine  the  hooks  and  assets  of  said 
association,  report  that  we  have  done  the  same,  and  find  the  assets  and  liabilities  correct 
according  to  the  statement  of  the  secretary  and  treasurer. 

The  Association  holds: 

15  mortgages  twenty-seventh  class $9,400  00 

12  mortgages  twenty-eighth  class IS, 400  00 

10  mortgages  twenty-ninth  class 8,950  00 

16  mortgages  thirtieth  class 11,425  00 

32  mortgages  thirty-first  class 22,125  00 

16  mortgages  thirty-second  class 20,350  00 

20  mortgages  thirty-third  class 22,875  00 

19  mortgages  thirty-fourth  class 28,250  00 

2S  mortgages  thirty-fifth  class 22,200  00 

14  mortgages  thirty-sixth  class 24,100  00 

14  mortgages  thirty-seventh  class 19,000  00 

8  mortgages  thirty-eighth  class 7,100  00 

207  mortgages,  amounting  to $214,175  00 

Due  by  members  as  tier  statement 4,217  77 

Prepaid  stock ". 1,469  94 

Office  furniture 261  47 

Cash  on  hand 5,321  94 

Gross  assets  as  above $225,446  12 

We  find  that  the  income  from  the  stock,  after  the  association  paying  all  taxes,  is  nearly 
6.7  per  cent,  per  annum. 

Number  of  shares  in  the  12  series  to  April  1 5,178 

Number  of  shares  in  the  39th,  opened  April  1 642 

5,820 
II.  B.  FOWLER, 

T.  S.  FRANKLIN, 

JOHN  B.  ALEXANDER 

[Finis.] 


Photomount 

Pamphlet 

Binder 

Gaylord  Bros. 

Makers 

Syracuse,  N.  Y. 

PAT.  JAM  21, 1908 


00040628295 

FOR  USE  ONLY  IN 
THE  NORTH  CAROLINA  COLLECTION 


